What determines bank CDS spreads? Evidence from European banks

Danilo Drago, Caterina di Tommaso, John Thornton

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28 Citations (Scopus)
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We examine the determinants of CDS spreads for a sample of European and US banks. The key balance sheet determinants are leverage, asset quality, funding stability, and bank size, and the key market determinants are equity returns, the term structure of interest rates and bank-specific and host country sovereign credit risk. Our results would appear to confirm the applicability of Merton (1974)-type models extended to include market variables to the understanding of bank credit risk.
Original languageEnglish
Pages (from-to)140-145
JournalFinance Research Letters
Issue number8
Early online date3 Jan 2017
Publication statusPublished - Aug 2017

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