European Banking Monitor: Greece Inflects To The Upside

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 .

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European Financial CDS - Major widening (+205 bps) at Greek bank EFG Eurobank caused the average European bank swap to widen by 2 bps, but the median was actually tighter by 6 bps. French, Italian and Spanish banks continued to post overall, steady improvement.

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Sovereign CDS – Sovereign swaps were modestly tighter around the globe last week with the exception of Japan and Spain, where swaps widened by 6 and 1 bps, respectively. Despite the sharp increase, Japanese swaps remain 3 bps below their levels from one month ago.

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Euribor-OIS Spread – The Euribor-OIS spread widened by 1 bps to 14 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. 

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ECB Liquidity Recourse to the Deposit Facility – 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.  

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