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Charting The Deterioration Of Bank Self-Assessed Counterparty Risk Through 3 Month USD Libor

Tyler Durden's picture


When it comes to counterparty risk, one can look at CDS, for an indication of how the market view a given bank's counterparty risk, or, one can observe how the banks themselves evaluate each other, courtesy of daily Libor fixings by bank. When it comes to Europe it is well known that dollar funding pressures are the most representative of overall liquidity stress. As such, we look at the 3 Month USD libor for various BBA-reporting banks. The picture, over the past month, is not pretty, especially if one is Barclays or RBS. The chart says it all.


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Thu, 08/25/2011 - 17:02 | Link to Comment HedgeFun
HedgeFun's picture

Looks like a chart of all my gold stocks.

Thu, 08/25/2011 - 18:07 | Link to Comment monopoly
monopoly's picture

Good one Hedge  :)

Thu, 08/25/2011 - 17:03 | Link to Comment Bohemian Clubber
Bohemian Clubber's picture

But are you ready ?

Thu, 08/25/2011 - 17:24 | Link to Comment scatterbrains
scatterbrains's picture

For those that made a few benniebucks today fading that fat man in the bath tub......



Thu, 08/25/2011 - 17:03 | Link to Comment Gubbmint Cheese
Gubbmint Cheese's picture

the higher the CDS, the closer to God? That's a good thing right?

Thu, 08/25/2011 - 17:41 | Link to Comment A.W.E.S.O.M.-O 4000
A.W.E.S.O.M.-O 4000's picture

Like there's a God. Too funny

Thu, 08/25/2011 - 18:06 | Link to Comment Bohemian Clubber
Bohemian Clubber's picture

Don't know about that.. but i sure know some people are trying to do God's job..

Thu, 08/25/2011 - 17:04 | Link to Comment tekhneek
tekhneek's picture

How's this compare to circa 2007-2009?

Thu, 08/25/2011 - 19:42 | Link to Comment DeadFred
DeadFred's picture

I keep track here The Fed rate makes it difficult to compare.

Thu, 08/25/2011 - 17:11 | Link to Comment lolmao500
lolmao500's picture

What about the CDS on Canadian banks? Any action there?

Fri, 08/26/2011 - 04:44 | Link to Comment ZeroPower
ZeroPower's picture

Slightly wider only due to overall market deterioration. But CAD CDS arent often traded anyway.

Thu, 08/25/2011 - 17:11 | Link to Comment Herman Strandsc...
Herman Strandschnecke's picture

'Looks like a seizemygraft

Thu, 08/25/2011 - 17:13 | Link to Comment Jim in MN
Jim in MN's picture

Except that we now know that LIBOR itself is manipulated by the evildoers, per the Schwab lawsuit against Citi, BoA et al.

So add that to the magic 8 ball.

Thu, 08/25/2011 - 17:19 | Link to Comment Killer the Buzzard
Killer the Buzzard's picture

I'm afraid Jim in MN is correct.  No one wants to report a relatively high LIBOR to the BBA as that telegraphs weakness and counterparty risk.  LIBOR isn't as reliable an indicator as it once was (if it ever was).

Thu, 08/25/2011 - 17:21 | Link to Comment MichaelG
MichaelG's picture

So they're all even more fucked than it appears?

Thu, 08/25/2011 - 17:35 | Link to Comment Killer the Buzzard
Killer the Buzzard's picture

By a very wide margin.  CDS spreads give a better picture.

Thu, 08/25/2011 - 21:47 | Link to Comment o2sd
o2sd's picture

What about EURIBOR? I wonder how they even calculate that now that there is such an enourmous spread between EUR issuers.


Fri, 08/26/2011 - 04:49 | Link to Comment ZeroPower
ZeroPower's picture

What? EURIBOR calculated same way LIBOR is. The former by an EU org, the latter by the Brits (i.e. largest global banks)

Sat, 08/27/2011 - 19:28 | Link to Comment o2sd
o2sd's picture

From Wikipedia:

A representative panel of banks provide daily quotes of the rate, rounded to two decimal places, that each panel bank believes one prime bank is quoting to another prime bank for interbank term deposits within the Euro zone, for maturity ranging from one week to one year. 

Do you see the problem? Hard to know what is a 'prime' bank anymore in the Eurozone. I mean, would you lend to a Greek or Italian bank at EURIBOR? What about SocGen? Are they really AAA? I guess that's why money markets are so volatile now, and the CDS market so big.

Thu, 08/25/2011 - 18:03 | Link to Comment JW n FL
JW n FL's picture



 New item in your series of interest:

Working Paper No. 11/206:

The Taxation and Regulation of Banks

Author / Editor: Keen, Michael

Summary: The financial crisis has prompted a reconsideration of the taxation of financial institutions, with practice outstripping principle: France, Germany, the United Kingdom and several other European countries have now introduced some form of bank tax, and the U.S. administration has revived its own proposal for such a charge. This paper considers the structure, appropriate rate, and revenue yield of corrective taxation of financial institutions addressed to two externalities, consequent on excessive risk-taking, prominent in the crisis: those that arise when such institutions are simply allowed to collapse, and those that arise when, to avoid the harm this would cause, their creditors are bailed out. It also asks whether corrective taxation or a regulatory capital requirement is the better way to address these concerns. The results suggest a potential role for taxing bank borrowing, perhaps as an adjunct to minimum capital requirements, at marginal rates that rise quite sharply at low capital ratios (but are likely lower when the government cannot commit to its bailout policy), reaching levels higher than those of the bank taxes so far adopted or proposed.

Thu, 08/25/2011 - 17:17 | Link to Comment Irish66
Irish66's picture

Don't worry, if NYC gets hit, BANK HOLIDAY coming

Thu, 08/25/2011 - 17:27 | Link to Comment MichaelG
MichaelG's picture

A scheduled Bank Holiday in Britain on Monday. Now that's what I call 'priced in.'

Thu, 08/25/2011 - 17:27 | Link to Comment gwar5
gwar5's picture

Rickards:  The central bankers are treating all the problems as if there's a liquidity problem, when it's a structural debt problem, a solvency problem.


Thu, 08/25/2011 - 19:33 | Link to Comment Ungaro
Ungaro's picture

and a crisis of confidence. No one trusts bank balance sheets (BS for short) now. Confidence is the linchpin of banking.

Thu, 08/25/2011 - 17:27 | Link to Comment Village Smithy
Village Smithy's picture

I noticed that a Canadian bank the Bank of Nova Scotia, is spiking. They are also a PM depository. Hmmm.

Thu, 08/25/2011 - 17:34 | Link to Comment AbandonShip
AbandonShip's picture

UBS: "Wait for me guys!"

Thu, 08/25/2011 - 18:56 | Link to Comment chump666
chump666's picture

Three days ago CDS markets were looking gloomy - and they are getting gloomier. We get three days of no volume meltups, then the see equity selling pressure coming through. IMO, stocks last session got off lightly.  Market is starting to trend down into lower supports. 

Thu, 08/25/2011 - 21:06 | Link to Comment disabledvet
disabledvet's picture

It's full on CRAZY TRAIN now. JP Morgan is days away from becomimg the biggest bank in human history-but dont mistake that for being profitable. They're tied to the mast of Obama's economy and i would call this behemouth a failure of Gigantism. Stay small and nimble as the blow ups of state and local governments has just begun and all those "bailout bucks" that have been promised fail to materialize.

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