Dollar Libor Market Hints 66x Leveraged Credit Agricole Was Bank X

Following yesterday's shove-liquidity-down-your-throat-of-last-resort action by the Fed et al. 3M USD Libor fell, admittedly marginally, for the first time since July 25th. The 0.1bps compression was practically insignificant as only 4 of the 18 member banks actually reduced their bids - Citi, Rabobank, RBC, and UBS but we are sure headlines will crow of the impact the coordinated central bank action has had already. What is most concerning when we look at the individual Libors of each member is one bank stands out over the last few weeks. Given that we know the dollar funding market is highly stressed (USD-cross currency basis swaps), this appears to be the only efficient way to understand which bank might be under the most stress. Given Credit Agricole's notably weak Tangible Common Equity Ratio and the fact that its Libor was such an outlier recently, it is hard not to suspect the global stick-save was instigated because this $1.59tn asset-heavy bank was on the verge of failure.

Credit Agricole's borrowing rate has been an outlier for the last few weeks suggesting, given the dollar funding stresses we know exist, a far greater desire to borrow USD than the rest of the motley Libor crew.

And given Credit Agricole's 2nd worst position on Bloomberg's Tangible Common Equity Ratio screen (behind Landesbank Berlin no less), it is hardly surprising that the giant French bank is suffering. At 66x leverage, it is perhaps no wonder the massive French bank was willing to pay up to 13bps more for 3M USD than the average Libor in early November, and still 7bps more (around a 15% premium).  As an aside, the whining out of Deutsche Bank this morning (to be discussed shortly) that "using the swap lines is not stigmata" is perhaps understandable considering their position in the "weakest TCE Ratio" screen is third worst, just behind CA.

Charts: Bloomberg