The EP position would ban purchases of uncovered credit default swap contracts on sovereign bonds. However, MEP Syed Kamall has warned that a ban on naked sovereign CDS would send a message of confusion to markets and stifle investment in EU Member States.
"A ban on naked credit default swaps (CDS) will do little to stabilise bond markets but it will encourage even more complex financial products to take their place, adding more risk to the financial system", Syed Kamall, MEP, Conservative shadow Rapporteur on a proposed Directive, said today.
Dr Kamall thinks caution should be key here. "Given the situation in Greece, Ireland and Portugal we should not promote financial policy that could cause further doubt in already stressed bond markets."
Dr Kamall said: "We should not ban financial products just because they are unpopular in some circles. Sometimes it is our role as politicians to make the right choices even when they are not the popular ones". "These are sensitive times and even flirting with the idea of a ban is causing danger and uncertainty in sovereign debt markets."
MEPs will now go back to negotiating a common position with national governments in an attempt to reach agreement.
Press release
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