The German Federal Financial Supervisory Authority is investigating the extent to which financial firms are selling credit-linked notes to retail customers and whether they are explaining the risks involved adequately.

To this end, BaFin has sent a market-wide survey to issuers of credit-linked notes. Among other things, it covers the scope of those notes, the size of the average coupon and the origin of the credit risks used in the structuring. BaFin has also written to around 100 companies (selected as an initial sample) and asked them about the sale of these products. With these companies, the proportion of retail clients who are sold credit-linked notes – whether as a result of investment advice or without such advice – is of particular interest. The companies are also being asked if the investment advisors they use have been specially trained in this area.