Buyers and sellers of CDSs

Greater regulation on the extent to which banks are exposed to corporate clients has meant banks have eagerly adopted credit default swaps to transfer risk, however concerns have been expressed in certain quarters about where the transferred credit risk is going

Unsurprisingly, commercial banks are the largest players in the CDS market. According to figures compiled by the British Bankers’ Association (BBA), banks accounted for 52% of the protection buyers market and 39% of the protection sellers market in 2001. The BBA expects both these shares to drop by 2004, to 47% and 32% respectively. That would still make banks dominant in the market for protection buying, but in terms of protection selling they would be overtaken by insurance companies, the