Abstract
We examine financing cost implications of non-performing loan (NPL) divestitures in the European banking industry. Based on a uniquely large transaction database covering 180 NPL sales, we analyze whether selling banks are able to reduce their financing costs measured by CDS spread changes. We do not find a significant tightening of CDS spreads around NPL divestitures, indicating that European banks are not able to reduce their financing costs by NPL portfolio sales.