Credit spread interdependencies of European states and banks during the financial crisis

► We study the relationship between Eurozone sovereign and bank CDS spreads. ► We use cointegration analysis, Granger causality and generalized impulse responses. ► We focus on the effects of bank bailouts on this linkage. ► At the beginning of the crisis bank default risk impacted their host countries' CDS. ► After bailouts sovereign CDS spreads become an important determinant of bank CDSs.