Hi Vinayak. If the credit event were large enough, it would force the system to delever. In your example, assume a specific bank has a large amount of CDS that trigger, say $1 billion. Let's say the bank has $1 billion in capital. Given the numbers in the article it is impossible to assume that banks will have adequate capital to absorb a large credit event. At some point the banks will not have enough capital. At that point, the bank needs to delever. When the banking system has to delever en masse, it means money supply shrinks. Because we are talking about such LARGE numbers in CDS and other derivatives, this phenomon is likely to create a large credit event. If it were an insurance company that owed on the CDS claim, then they would have to delever creating a ripple effect throughout the economy. In any event, try not to think about it as what happens at one firm, think about what happens when it is many firms at once. Thanks for the question!