Definition: Credit default swaps (CDS)

Category: European System of Accounts (ESA)

Credit insurance contracts. They are intended to cover losses to the creditor (buyer of a CDS) when:

(a) a credit event occurs in relation to a reference unit, rather than being associated to a particular debt security or loan. A credit event affecting the reference unit of concern may be a default, but also a failure to make a payment on any (qualifying) liability that has become due as in cases such as debt restructuring, breach of covenants, and others; 
(b) a particular debt instrument, typically a debt security or a loan, goes into default. As with swap contracts, the buyer of the CDS, (regarded as the risk seller), makes a series of premium payments to the seller of the CDS (regarded as the risk buyer). http://ec.europa.eu/eurostat/product?code=KS-02-13-269&mode=view European Union, Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European system of national and regional accounts in the European Union, Official Journal of the European Union No L 174, 26.06.2013, p. 1 - 727