Research published by the Bank for International Settlements sheds light on how banks make use of credit default swaps and the effects this may have on the market.
Iñaki Aldasoro and Andreas Barth study how banks use CDS when making syndicated loans, linking data on more than 1,000 banks in 28 countries. They find that while banks often use CDS for hedging, they also use them for “doubling up” their exposures.
The authors also examine how bank characteristics affect CDS use, finding “healthier
- Turkish central bank carries out emergency rate hike as currency falls
- BoE research says digital currency would ‘strengthen’ policy transmission
- US House passes deregulation bill with bipartisan support
- Brazil’s central bank launches fintech laboratory
- Is this the beginning of a new era of credit risk management technology?