CFA Institute Systemic Risk Council (the Council) recently provided detailed comments to the Honorable Jerome Powell, Chair of the Board of Governors of the Federal Reserve System, on the growing systemic vulnerabilities to the global financial system posed by credit derivatives known as credit risk transfer transactions (CRTs). While the rapidly expanding use of these instruments by Global Systemically Important Banks (“GSIBs”) and other banks are meant to shift all or a portion of their credit and interest rate risks to private market investors, these transactions bring potentially harmful consequences for systemic stability. Timely action is needed to better monitor and prevent these transactions from again creating many of the same problems that led to the global financial crisis in 2008.

Letter PDF