ESRB publishes CDS market report proposing transparency reforms
The European Systemic Risk Board (ESRB) has published a report analysing credit default swaps (CDS) markets, identifying significant market imperfections and proposing four policy measures to address systemic risks. The report finds that about 80% of single-name CDSs on EU global systemically important banks and 75% on EU sovereign debt are not centrally cleared and therefore not subject to Markets in Regulation (EU) No 600/2014 (Financial Instruments Regulation (MiFIR)) public disclosure requirements. The ESRB proposes enhancing post-trade transparency for single-name CDSs on EU entities regardless of clearing status, strengthening supervisory data quality and international cooperation, promoting market efficiency, and reducing excessive reliance on CDS spreads for credit risk assessment. The report notes that more than a decade after Regulation (EU) No 648/2012 (European Market Infrastructure Regulation (EMIR)) reporting requirements were introduced, substantial data quality shortcomings persist, limiting authorities' ability to monitor systemic risks effectively.