THE US central bank is looking into Goldman Sachs’s role in arranging contentious derivatives trades for Greece, which helped the country to massage its public finances, Ben Bernanke,chairman of the Federal Reserve, revealed yesterday.

“We are looking into a number of questions relating to Goldman Sachs and other companies and their derivatives arrangements with Greece,” Mr Bernanke said, noting that the US Securities and Exchange Commission was also interested in the issue. However, Mr Bernanke did not give any more details about the investigations. Testifying before congress, the Fed chairman also criticised the use of financial instruments, such as credit default swaps (CDS), that destabilised a country or created runs against governments as “counterproductive”.

Mr Bernanke’s comments came as an official in German chancellor Angela Merkel’s ruling Christian Democratic Union party said the G20 nations were discussing whether a ban on the speculative use of CDS was workable.

The renewed uncertainty about Greece prompted a further sell-off of the country’s bonds and the euro amid rising fears that Athens faced a credit ratings downgrade that would complicate its goal of refinancing its debt.

Greek bonds saw one of their biggest one-day falls of the year with yields on two-year bonds climbing to 6.4 per cent. The euro fell to a one-year low against the yen and near a nine-month low against the US dollar. This was in spite of signals from Athens that it would introduce new austerity measures early next week.

Goldman has come under fire from European regulators for structuring transactions that helped Greece trim its debt figures after it joined the European Monetary Union in 2001. As Greece’s public debt grew to exceed its annual gross domestic product, the bank helped it organise a currency trade to delay its repayments.

Goldman has said that the currency swaps played a minimal role in Greece’s current financial crisis and that the transactions were in line with European regulations. However, a senior Goldman banker told a UK parliamentary committee last week that the bank should have been more transparent.

Separately, Phil Angelides, chairman of the US Financial Crisis Inquiry Commission, said that he was concerned about the financial market practice of creating securities and “fully betting against them” – and about Goldman’s role in particular.