The Committee on the Global Financial System (CGFS), a forum for central bankers, has released a report exploring how data on credit risk transfer (CRT) instruments collected under its auspices could be enhanced. The Committee says that information on structural changes in global CRT markets and on the transfer and ultimate distribution of credit risk has not been sufficiently comprehensive or timely.

Consequently, one of the forum's main focuses is to expand its coverage of credit default swap instruments. It proposes some short-term and longer-term changes to existing CDS reporting, which are expected to be fully implemented by June 2011.

On the basis of their high degree of usefulness to analysts and low reporting costs, two items have been identified as candidates for 'quick implementation' - a new counterparty field of central counterparties (a 'priority' item) and index CDS as a new "reference entity" (an 'encouraged' item) - possibly to be first implemented in the 2010 BIS Triennial Survey of Foreign Exchange and OTC Derivatives Markets.

With a view to improving the consistency of data across reporting countries, a list of qualified CCPs will be issued to reporting agents. Separately, in order to improve the identification of counterparties, reporting agents will also be asked to record contracts with hedge funds using the EU's definition of hedge funds as a reference.

To allow reporters enough time to prepare for more complex changes, an extended template incorporating a further four recommendations have been proposed for full implementation by June 2011, which would allow the first set of new data to be published in October that year. The recommendations are:

• regional counterparty breakdowns should be recorded of the total outstanding amounts bought and sold for all CDS contracts, and a list of counterparties and their geographical location should be included in the new guidelines;
• ABS CDS should be introduced as a new reference entity under the subcategory of portfolio or structured products, with implementation subject to further work on what types of ABS should be included and a clear definition being made available to reporters;
• in the spirit of the reporting of other non-CDS derivative instruments, net market values based on the BIS guidelines for regular credit default swap reporting should be added; and
• reporting agents should be asked to also report the total amounts of synthetic CDOs being bought and sold (i.e. without any geographical or counterparty breakdowns).

The proposed extended CDS reporting template takes into account the usefulness of new data for analysis and the need to minimise the burden on reporting agents, the Committee notes. This was achieved via a two-stage merits and costs consultation process.

A questionnaire was first sent to member central bank and official sector analysts to evaluate the benefits of a set of possible improvements to CRT statistics. On the basis of the results of this evaluation, the proposed changes were streamlined and sent to reporting agents for another round of consultation.

The report also reviews the potential for using the DTCC global CDS data to supplement BIS data for the purpose of monitoring market developments. Initial results suggested that DTCC data captured a significant part of global markets between reporting dealers but not with non-dealers. Given that the DTCC is in the process of improving its records on non-dealers' transactions, the report recommends that further comparison exercises be conducted for end-June and end-December 2009 BIS data.