Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .

For our most recent outlook on Europe titled "Where's Europe At?" please see: http://app.hedgeye.com/feed_items/28511  

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European Financial CDS - French, Spanish and Italian banks saw swaps mostly widen last week. Overall, swaps were wider, by a median of 6 bps.

European Banking Monitor: Financial Swaps Mostly Wider - y. banks

Sovereign CDS – Italy, Portugal and Japan all dropped 6-8 bps WoW. Elsewhere, swaps were flat to down 2 bps. The world remains a calm place for now.

European Banking Monitor: Financial Swaps Mostly Wider - y. sov 1

European Banking Monitor: Financial Swaps Mostly Wider - y. sov2

European Banking Monitor: Financial Swaps Mostly Wider - y. sov3

Euribor-OIS Spread – The Euribor-OIS spread was unchanged week-over-week at 13 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

European Banking Monitor: Financial Swaps Mostly Wider - y. euribor

ECB Liquidity Recourse to the Deposit Facility – Deposits declined week over week by 37.6 billion Euros. The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  

European Banking Monitor: Financial Swaps Mostly Wider - y. facility

Matthew Hedrick

Senior Analyst