More information on credit risk transfer needed, says IMF’s Häusler

Gerd Häusler, director of the international capital markets department at the International Monetary Fund (IMF), today highlighted that too little is known about where credit risk ultimately resides in the financial system.

Häusler, who was giving a briefing at the Bank of England on the IMF’s latest Global Financial Stability Report, said: “There is a lack of transparency about where credit risk ends up,” but he added that “credit risk transfer poses no systemic threat to the financial system".

He also claimed that the uncertainty over the extent to which insurers, reinsurers, institutional investors and hedge funds are exposed to credit risk through credit derivatives is adding to general uncertainty in the financial markets.

Asked from the floor whether he believed a consolidated European financial regulator was needed to more effectively track risk transfer, Häusler said: “It’s not necessary to have a single European regulator,” and he claimed it was possible for strong, individual regulators to work together to monitor credit risk transfer.

His colleague, deputy director Hung Tran, said the increased disclosure and knowledge required could come from either market practice or new regulation.