Jean-Claude Trichet, President of the European Central Bank, on Friday threw a strong push for introducing tougher regulation and oversight of the huge credit default swap market.

The main aim behind the use of centralized clearing facilities is introduce more transparency in the CDS market thereby decreasing the incentive to take "excessive risks".

"It seems to me it is the best way in the present period to force, if I may, appropriate transparency, which is very important, and to have better understanding of the risks that are at stake", Trichet revealed reporters in Brussels today.

"So we are pushing in this direction, on both sides of the Atlantic, very, very strongly", he added.

The European Union may consider banning "purely speculative naked" credit default swaps, European Commission President Jose Barroso reported on March 9.

Credit default swaps are basically an insurance type that pays the buyer face value if a borrower defaults. And, the swap seller is granted the underlying securities or the cash equivalent in exchange. Traders in naked swaps buy insurance on bonds they don't own.