Related-Party Credit Default Swap Pricing Reflects Group’s Risk

The pricing of intragroup credit default swaps may include consideration of risk factors associated not only with the borrower but also with the related seller.

In the recent Crédit Industriel et Commercial SA v. Ministère de l’Économie et des Finances (Dec. 15, 2023, court decision in French), the Paris Administrative Court of Appeal held in favor of the taxpayer, reversing a lower court’s affirmation of the French tax authority’s upward adjustment of an intercompany CDS issued by the French subsidiary of Crédit Mutuel to the Banque de Luxembourg, which also is a subsidiary of Crédit Mutuel.

The Economics of Credit ...