On the one hand, credit risk transfer, in principle, leads to a more efficient allocation of risks. On the other, credit risks do not disappear in the process and are often shifted into unregulated market segments. As transactions take place over the counter, there is no publicly available information on where the risks go. Transparency suffers.
In addition, new risks emerge, such as counterparty risks. Growth in the credit risk transfer market has been enormous. For instance, the outstanding volume of credit default swaps more than doubled in both 2005 and 2006. Between 2001 and 2006, CDS notional amounts outstanding increased from USD 632 billion to over USD 34 trillion.