European Banking Monitor: Tightening on the Week

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 - Swaps were generally tighter among European banks last week, mirroring the trend we saw in EU sovereigns. We've been calling out Sberbank of Russia as a laggard in recent weeks with the commodity crack-up casting a shadow over its outlook. Last week we saw some reprieve for Russia's largest bank with swaps tightening 27 bps to 250 bps.

European Banking Monitor: Tightening on the Week - uu. banks

Sovereign CDS – Sovereign swaps globally last week, with the exception of France, which saw its swaps widen 2 bps to 80 bps. Germany was unchanged at 32 bps. Japan tightened by 8 bps to 78 bps. 

European Banking Monitor: Tightening on the Week - uu sov 1

European Banking Monitor: Tightening on the Week - uu sov 2

European Banking Monitor: Tightening on the Week - uu sov3

Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bp to 11 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: Tightening on the Week - uu euribor

ECB Liquidity Recourse to the Deposit Facility – Overnight deposits rose 7.1 billion Euros last week. 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: Tightening on the Week - uu. facility