Resolution regimes could cause bank CDS spreads to tighten
Credit analysts predict drop in credit default swap spreads under new bank resolution regimes
Credit strategists have predicted that new bank resolution regimes could lead to cheaper credit default swap (CDS) protection, following an April report from the Federal Deposit Insurance Corporation (FDIC) on creditor recovery rates for Lehman Brothers.
The FDIC says senior unsecured creditors would have recovered 97% of their claims had it been able to wind down Lehman in an orderly fashion using the resolution regime set in place by the Dodd-Frank Act – a significant improvement on the
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