Central Bank Digital Currencies and Banking Disintermediation risk: Whether and to what extent do CBDC related publications generate significant abnormal variations in CDS spreads of Chinese banks.The e-CNY case.

Details

Supervisors

Thewissen, James

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion, à finalité spécialisée

Abstract

Despite being one of the most actively debated topics in contemporary monetary economics, empirical evidence on market reactions to the perceived risk of banking disintermediation induced by the implementation of a Central Bank Digital Currency (CBDC) remains scarce. This research paper addresses this issue by investigating whether e-CNY-related events generate statistically significant abnormal variations on the Credit Default Swap spreads of three Chinese globally systemically important banks (G-SIBs). The methodology employed relies on an event study applied to 438 publications over the period [2019–2026], covering the full development trajectory of the e-CNY. The results indicate that e-CNY publications generate statistically significant cumulative abnormal returns across all three event windows tested, [-1,+1], [-3,+3] and [-5,+5], leading to the rejection of the null hypothesis of no significant abnormal variation in Chinese bank CDS spreads. From a phase-based perspective, market reactions intensify significantly across three temporally defined phases, corresponding to the implementation, expansion and internationalisation periods of the Chinese CBDC pilot. Phase differences are statistically significant but non-monotonic, suggesting a structural but non-linear intensification of investor risk perception. A log-linear time-series regression identifies a statistically significant upward temporal trend in market reactions, driven primarily by media publications rather than official institutional sources. A sovereign CDS comparative analysis indicate that the upward temporal trend is statistically significant for the banking sector but insignificant for the sovereign one. These results contribute to the emerging literature on CBDC-related risks by providing the first empirical evidence of a theoretically induced disintermediation risk that is measurable through CDS spreads and specific to the banking sector.