MEP voted for banning uncovered sovereign CDS
Members of the European Parliament’s Economic and Monetary Affairs Committee voted yesterday in favor of banning uncovered sovereign credit default swaps and naked short selling- in which speculators predict falling securities prices.
The result was partly a reaction to several member states’ defaulting on loan obligations being implicated in the EU’s sovereign debt crises, and it is hoped the move will curtail risk and increase transparency within European financial transactions.
The result has not been welcomed by business, as Sean McGuire, Director of CBI Brussels, explains:
“The Parliament’s decision to ban the use of uncovered sovereign credit default swaps is bad for business.
“These financial tools are used by many companies to manage their international risks, and restricting their use will make it harder for firms to grow and export across Europe.
“MEPs should think carefully about the implications of this decision and reconsider their position.”
