02195cas a2200253 a 4500 AALejournalIMF006558 230101c9999 xx r poo 0 0eng d 5.00 USD 9781455201365 1018-5941 BD-DhAAL BD-DhAAL Podpiera, Jiri. The Fundamental Determinants of Credit Default Risk for European Large Complex Financial Institutions / Jiri Podpiera, Inci Otker. Washington, D.C. : International Monetary Fund, 2010. 1 online resource (31 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper attempts to identify the fundamental variables that drive the credit default swaps during the initial phase of distress in selected European Large Complex Financial Institutions (LCFIs). It uses yearly data over 2004 - 08 for 29 European LCFIs. The results from a dynamic panel data estimator show that LCFIs' business models, earnings potential, and economic uncertainty (represented by market expectations about the future risks of a particular LCFI and market views on prospects for economic growth) are among the most significant determinants of credit risk. The findings of the paper are broadly consistent with those of the literature on bank failure, where the determinants of the latter include the entire CAMELS structure - that is, Capital Adequacy, Asset Quality, Management Quality, Earnings Potential, Liquidity, and Sensitivity to Market Risk. By establishing a link between the financial and market fundamentals of LCFIs and their CDS spreads, the paper offers a potential tool for fundamentals-based vulnerability and early warning system for LCFIs. Mode of access: Internet Otker, Inci. IMF Working Papers; Working Paper ; No. 2010/153 Full text available on IMF http://elibrary.imf.org/view/journals/001/2010/153/001.2010.issue-153-en.xml IMF e-Library