OFR Issues Working Paper Examining the Influence of Systemic Importance Indicators on Banks' Credit Default Swap Spreads

The Office of Financial Research ("OFR") issued a working paper that examines the relationship between banks' credit default swaps ("CDS") spreads and possible measures of systemic importance.

In the paper, the OFR finds banks perceived as too big to fail to have CDS spreads that are 44 to 80 points lower than other banks, depending on the asset-size threshold and controls used. Additionally, the study suggests that market participants pay more attention to asset size than to more complex measures, such as the designation of a globally systemically important bank.

See: The Influence of Systemic Importance Indicators on Banks' Credit Default Swap Spreads.