Syndicated Loans and CDS Positioning

47 Pages Posted: 5 Nov 2020

See all articles by Iñaki Aldasoro

Iñaki Aldasoro

Bank for International Settlements (BIS)

Andreas Barth

Goethe University Frankfurt - Department of Finance

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Date Written: November, 2017


This paper analyzes banks’ usage of CDS. Combining bank-firm syndicated loan data with a unique EU-wide dataset on bilateral CDS positions, we find that stronger banks in terms of capital, funding and profitability tend to hedge more. We find no evidence of banks using the CDS market for capital relief. Banks are more likely to hedge exposures to relatively riskier borrowers and less likely to sell CDS protection on domestic firms. Lead arrangers tend to buy more protection, potentially exacerbating asymmetric information problems. Dealer banks seem insensitive to firm risk, and hedge more than non-dealers when they are more profitable. These results allow for a better understanding of banks’ credit risk management.

Keywords: asymmetric information, capital regulation, CDS, cross-border lending, EMIR, speculation, syndicated loans

JEL Classification: G21, G28

Suggested Citation

Aldasoro, Iñaki and Barth, Andreas, Syndicated Loans and CDS Positioning (November, 2017). ESRB: Working Paper Series No. 2017/58, Available at SSRN:

Iñaki Aldasoro (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002

Andreas Barth

Goethe University Frankfurt - Department of Finance ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt, 60629

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