Financial innovation can bring an essential contribution to growth and prosperity. But it can also create significant instability. To reap the benefits of innovation and reduce its risks, we need robust and resilient financial systems and infrastructures. At Pittsburgh, G20 leaders have also called for more extensive regulation.

Credit Default Swaps (CDS) are a case in point. A recently published report by the European Central Bank, based on intensive quantitative and qualitative work performed by Eurosystem central banks* with the contribution of the industry, highlights two important features of the CDS market.