CDS Credit Event Determination and the Systemic Importance of Sovereign CDS

Published in 
CEPS - Centre for European Policy Studies 1 Place du Congrès / Congresplein 1000 Brussels

As revealed in this ECMI research seminar, the equation “LTRO + ESM – PSI = LY” roughly captures investors’ perceptions of sovereign bond markets in Europe. In effect, the longer-term refinancing operations (LTRO) carried out by the European Central Bank and the future European Stability Mechanism (ESM) are easing the pressures in sovereign bond markets and are seen positively by market participants. Yet private sector involvement (PSI) in the rescue package for Greece is believed to have had the opposite effect, undermining market confidence despite reducing moral hazard. As a result of the interaction of these three factors, investors are expecting low yields (LY) in Europe, coupled with uncertainties about the future. To overcome this impasse, experts and investors present at this seminar favoured common issuance, introduced progressively over the medium term, in combination with structural reforms, to make the equation work to the benefit of member states and their citizens.

Materials [click below to download]

  • Presentation ISDA - by David Geen, General Counsel, International Swaps and Derivatives Association (ISDA)
  • Presentation DTCC - by Andrew Byatt, Vice-President, Depository Trust and Clearing Corporation (DTCC)


The Greek debt restructuring in July 2011 raised questions around the complexity of derivative contracts and the potential implications of a credit event. This seminar discussed the process through which the ISDA Credit Derivatives Determinations Committee decides whether a credit event has occurred, in specific factual circumstances, and the detail of standardised CDS contracts. The event assessed potential conflicts of interest in this process and how they are managed, and also examined political pressures therein, and what these mean for market efficiency and integrity.

The CDS business performs an important function in risk management for many different types of market participant. The debate also focused on the economics of the CDS market and the role of market transparency in limiting opacity and risks of contagion among financial and non-financial institutions.

  • What is a credit event, who decides when it should be triggered, and how?
  • What can we learn from the Greek CDS credit event?
  • Is additional regulatory oversight over this private competent body necessary? Or would more intrusive oversight itself call market integrity into question?
  • Are there risks of disorderly market effects from the sovereign CDS business?
  • Do regulators have sufficient and appropriate transparency regarding sovereign CDS activity and net positions?
  • Does the CDS market increase interconnection and risks of contagion? 


  • David Geen, General Counsel, International Swaps and Derivatives Association (ISDA)
  • Andrew Byatt, Vice-President, Depository Trust and Clearing Corporation (DTCC)
  • Nicolas Gauthier, Directorate-General for Internal Market and Services, European Commission
  • Karel Lannoo, ECMI General Manager, CEPS [moderator]


  • ECMI members, CEPS members, European institutions, national authorities, academics and press are admitted free of charge
  • Other participants may be admitted for €100, paid in cash at registration, a sandwich lunch will be served before the event (€6)
  • If you experience any problems during registration contact Isabelle Tenaerts at isabelle.tenaerts@ceps.eu or phone 0032 2 229 39 56


For more information please contact Mirzha de Manuel at mirzha.demanuel@ceps.eu or phone 0032 2 229 39 17.

Presentation ISDA473.16 KB
Presentation DTCC678.39 KB