The Committee on the Global Financial System (CGFS) has published three reports analyzing various issues relating to the financial market turmoil that broke out in mid-2007.

One of the report deals with private equity and leveraged finance markets; another deals with ratings in structured finance; and, the final report addresses central banks response to the financial market turmoil.

The private equity and leveraged finance report was prepared by a working group chaired by Henk Brouwer of the Netherlands Bank. It highlights a number of risks, including short-term risks associated with the unwanted expansion of banks’ balance sheets due to undistributed leveraged loans, medium-term risk resulting from the refinancing needs of highly leveraged corporations and long-term risks for the availability of leveraged finance.

The report dealing with ratings in structured finance was prepared by a CGFS study group led by Nigel Jenkinson of the Bank of England. While emphasising that credit rating information should support, not replace, investor due diligence, the report provides a number of specific recommendations on how the information provided on ratings of structured finance products can be improved.

The report on central banks examines how central banks have adapted their liquidity operations in response to the money market tensions that emerged during the turbulence. It was prepared by a study group convened by the CGFS in cooperation with the Markets Committee, under the chairmanship of the European Central Bank’s Francesco Papadia.

The report discusses the various measures taken by central banks, assesses the outcome of these measures and sets out seven recommendations for central bank liquidity operations.

CGFS chairman Donald Kohn said that these reports highlight the role that the committee has played during the market turbulence in informing central banks’ assessments of risks to financial stability and in elaborating appropriate policy recommendations. Earlier versions of the reports on central bank operations and credit ratings in structured finance served as input for the Financial Stability Forum report to the G7 finance ministers and central bank governors in April.