This paper investigates whether the initiation of trading in credit default swaps (CDSs) on a borrowing firm … on their loan portfolios by providing insurance on negative credit outcomes. The onset of CDS trading reduces lenders … lenders who monitor borrowers more regularly in the pre-CDS period enter into CDS contracts to hedge their credit exposures. …

credit growth experienced by these countries. We find that, on average, both bank capitalization and lending activities in … Latin America increased after Basel. Consequently, Basel did not seem to lead to an overall credit decline. However, we do … Basel II might cause greater procyclicality of credit. …