The European Central Bank’s head of supervision has called on global regulators to scrutinise trading in the market for insuring against a debt default, claiming it can trigger falls in a bank’s share price and threaten a run on deposits.
Andrea Enria, chair of the ECB supervisory board, said rule-setters at the Financial Stability Board, a global regulatory body, should review how the credit default swap market works after sharp moves in the price of such instruments preceded a sudden drop in the share prices of Deutsche Bank and other European lenders on Friday.
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