It seems to us that the entire global financial system continues to walk the tight-rope of public-confidence in fictional reserve banking. Where it is European (or Chinese) bank runs or mega losses at US bank non-proprietary businesses, it appears the credit market has been becoming more and more fearsome of the endgame since last Summer's US downgrade when S&P made the impossible possible. While not all of the US financials have active CDS, the dependence between stocks and credit had remained high with current CDS levels inferring a drop of over 60% in XLF as the top 30 globally most systemically important financial entities reach their March 2009 peak in riskiness once again.
US financials (XLF) vs credit (average CDS for the liquid names in the XLF index)...
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and at the same time the Financial Stability Board's 30 Most Systemically important entities have seen risk soar back to the March 2009 peak levels once again...
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Source: CMA and Bloomberg