CDS’s) to organized exchanges are key elements of enhancing transparency and mitigating counterparty credit risk in these markets. Seventh, correction of the prevailing adverse incentives created by an excessively short-term perspective of risk measurement and performance assessment. The introduction of new governance principles regarding risk management and compensation guidelines should help to align incentives with long-term sustainability.
Finally, improving the oversight of Credit Rating Agencies (CRA’s) and reducing the reliance on external ratings for official regulatory purposes. CRAs have contributed to the procyclicality of the financial sector and played a very negative role in the sub-prime crisis by failing to properly assess the risk characteristics of complex financial products. 2.