Market for Synthetic Risk Transfers Is Riddled With Gaps in Disclosure, IMF Officials Say

Regulators need to step up the oversight of banks’ use of synthetic risk transfers which may make the financial system more fragile, according to a paper released by a group of International Monetary Fund officials.

“Enhanced disclosure is important for markets,” IMF experts including Fabio Cortes and Gonzalo Fernandez Dionis wrote in the paper, Recycling Risk: Synthetic Risk Transfers. “There are significant gaps in data availability necessary for authorities to monitor interconnectedness and leverage and related financial stability risks in an effective and timely manner.”