RBI plans to set up working group to revisit the draft guidelines on credit default swaps (CDS)

The Reserve Bank plans to set up a working group to revisit the draft guidelines on credit default swaps (CDS) in view of the changed market scenario, deputy governor Shyamala Gopinath said here today.

“We are setting up a group in the RBI and they will interact with market participants,” Gopinath said at a banking seminar here. A credit default swap is a swap contract in which the buyer of the CDS makes a series of payments to the seller and, in exchange, receives a payoff if a credit instrument goes into default.

The apex bank placed the draft guidelines on CDS on its website for public comments in October 2007, much before the financial crisis hit the world economies. Later, she told reporters the central bank has a capital account management framework and is monitoring developments closely. “We have a capital account management framework.”