Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278582 
Year of Publication: 
2023
Series/Report no.: 
ECB Working Paper No. 2818
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Can banks trade credit default swaps (CDSs) referenced on their current corporate clients at competitive prices, or are banks penalized for potentially holding private information? To answer this question we merge CDS trades reported under the European Market Infrastructure Regulation (EMIR) with syndicated loans from DealScan, and compare the prices on similar CDSs that the same dealer offers to banks and to other investors. We find that banks lending to a corporation purchase CDSs on this corporation at lower prices, and that, after trading with banks, dealers can earn higher margins on these CDSs when trading with other investors. Our findings suggest that banks hold valuable private information which is shared in their trades with dealers. Dealers then disseminate this information to financial markets.
Subjects: 
Credit Derivatives
Banks
Price Discovery
EMIR
Syndicated Loans
JEL: 
G14
G21
G23
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6081-6
Document Type: 
Working Paper

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