The introduction of market-based pricing in corporate lending

Ivan Ivanov (), Joao Santos and Thu Vo ()
Additional contact information
Ivan Ivanov: U.S. SEC, Postal: 100 F Street NE,, Washington D.C. 20549, http://www.sec.gov/divisions/riskfin/economistbios/ivan-t-ivanov.shtml
Thu Vo: University of Rochester, Postal: Simon Graduate School of Business, University of Rochester, Rochester, NY 14627, http://thu-vo.simon.rochester.edu/index.html

Journal of Financial Perspectives, 2014, vol. 2, issue 1, 155-159

Abstract: We describe a recent innovation in the corporate lending business whereby banks tie the interest rate during the life of the loan to the borrowers’ credit default swap spreads or to a CDS index. We also discuss the potential impact this innovation may have on bank lending and more generally on financial intermediation and identify some potential adverse effects it may have for the stability of the financial system.

Keywords: financial intermediation; borrowing costs; market-based pricing (search for similar items in EconPapers)
JEL-codes: G21 G23 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofipe:0041

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