The European Systemic Risk Board (ESRB) published a report on the credit default swaps (CDS) market, warning that imperfections in the single-name CDS segment can impede price discovery and should be considered when using CDS spreads to assess creditworthiness. The report also sets out a medium-term policy roadmap aimed at improving market functioning, transparency and the quality of information available to authorities. The ESRB identifies CDS spread formation as being driven by low trading volumes among a limited set of counterparties, with high concentration raising concerns about market functioning in stress episodes such as the March 2023 banking turmoil, which is also examined in a report published by the International Organization of Securities Commissions. It also points to persistent information asymmetries due to incomplete post-trade transparency, noting that a large share of CDS on European sovereigns and on Global Systemically Important Banks is not subject to real-time public disclosure requirements under the Markets in Financial Instruments Regulation, creating information gaps for market participants and EU authorities. Separately, it highlights the need for timely access to high-quality, complete and standardised data for effective monitoring, and argues that global CDS trading alongside regional or local regulation increases the need for cross-jurisdictional cooperation and policy coordination.
European Systemic Risk Board 2025-11-04
European Systemic Risk Board report flags concentration and transparency gaps in single-name CDS markets and sets a medium-term policy roadmap
The European Systemic Risk Board published a report on the credit default swaps market, warning that imperfections in the single-name segment can impede price discovery and limit the reliability of CDS spreads for assessing creditworthiness. It highlights low trading volumes, high counterparty concentration, incomplete post-trade transparency and data gaps, particularly for European sovereigns and Global Systemically Important Banks, and calls for better data quality, transparency and cross-jurisdictional coordination through a medium-term policy roadmap.