EU Said to Be Close to Deal for Curbs on Naked Sovereign CDS

[dipsydoodle]

Source: San Fransisco Chronicle / Bloomberg

Oct. 17 (Bloomberg) -- The European Union is close to an agreement to insert an optional ban on naked credit-default swaps on sovereign debt into a draft law on short selling, under plans to be discussed by government officials and lawmakers tomorrow, according to two people familiar with the talks.

European Parliament lawmakers and officials from the Polish government, which holds the rotating presidency of the EU, are scheduled to discuss such a ban during a two-hour meeting, said the people who couldn't be identified because the discussions are private. The measure is part of negotiations on a draft EU law that would also curb naked short selling of stocks and government bonds, the people said.

The amount of flexibility that national governments should have to opt out of the rule will be part of the discussions, the people said. The officials and lawmakers will also discuss the terms of an exemption from the ban for traders holding assets whose value is closely linked to that of the sovereign debt.

German Finance Minister Wolfgang Schaeuble and lawmakers in the European Parliament have called for a ban on naked CDS trades on government debt over concerns the practice fueled the euro zone's debt crisis. Germany already has restrictions on using swaps to bet on sovereign defaults.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/10/17/bloomberg_articlesLT7H0907SXKX.DTL#ixzz1b2fptGDh


Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/10/17/bloomberg_articlesLT7H0907SXKX.DTL

[Laelth]

1. At least they're trying to do something. n/t

-Laelth

[xchrom]

2. recommend

[dipsydoodle]

3. Now a done deal - EU Gets Deal on Naked Sovereign CDS Curbs

The European Union reached a deal as part of a short-selling law that will pave the way for an optional ban on naked credit-default swaps on sovereign debt.

Poland, which holds the rotating presidency of the EU, and lawmakers from the European Parliament, reached the accord at a meeting in Brussels, EU spokeswoman Chantal Hughes said.

Under today’s deal, traders may be prevented from buying CDS on government bonds unless they either own the sovereign debt or other assets whose price moves in tandem with it. Nations will have the right to opt out of the measure if they detect signs that it may affect their borrowing costs.

“These balanced measures will ensure that sovereign CDS are used for the purpose for which they were designed, hedging against the risk of sovereign default, without putting at risk the proper functioning of sovereign-debt markets,” EU Financial Services Commissioner Michel Barnier said in a statement.

http://www.bloomberg.com/news/2011-10-18/eu-gets-deal-on-naked-sovereign-cds-curbs-short-selling-rules.html