Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212348 
Year of Publication: 
2016
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 10/2016
Publisher: 
Bank of Finland, Helsinki
Abstract: 
​We test five hypotheses on whether banks use CDS to hedge corporate loans, provide credit enhancements, obtain regulatory capital relief, and exploit banking relationship and private information. Linking large banks' CDS positions and syndicated lending on individual firms, we observe strong evidence for the credit enhancement and regulatory capital relief hypotheses, but mixed evidence for the hedging, banking relationship, and private information hypotheses. Banks buy and sell more CDS on their borrowers, but their net CDS positions and lending status are largely unrelated. We find no evidence of bank using CDS to exploit private information.
JEL: 
G14
G21
G23
G28
G32
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-105-4
Document Type: 
Working Paper

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