A crise bancária de Chipre e o Bail-in

: estudo de caso, com recurso ao mercado de Credit Default Swaps um ano depois

Abstract

The Cyprus bail-in of 2013 was a regulatory innovation, regarding the intervention procedures on banking institutions. Almost two years after this episode, it is important to understand its impact on the changes of the country’s default risk perceptions, to retrieve some conclusions related to the new acting rule. In order to evaluate the country’s risk, we use financial derivative on sovereign credit insurance: Credit Default Swaps (CDS). In order to study its evolution, Standard & Poor’s sovereign risk reports were used, as well as univariate and multivariate volatility models. Those studies allowed us to understand the Cypriot risk evolution in the previous and subsequent years to the bail-in implementation, underpinning factors (either internal or external) that contributed to this path. From those factors, it is important to point out the Greek contagion effect caused by the relationship between the two countries, which led to an increased risk for Cyprus, specifically in the short-term, meaning that the Hellenic situation affects Cyprus immediate default risk. This evolution also shows that, contrarily to what was intended, the bail-in did not have an immediate effect on country’s risk. Despite its downward trajectory, it remained at high levels, taking months until a major fall started to be observed. In spite of that, Cyprus default risk never returned to an acceptable and desirable level.

Date of Award	1 Jul 2015
Original language	Portuguese
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Carlos Manuel Ferreira dos Santos (Supervisor)