European Banking Monitor: Eerily Quiet?

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 .




European Financial CDS - The median European bank tightened by 6 bps last week and is tighter by 16 bps vs the previous month. 


ECB data showed that banks cut 5,500 branches across the EU last year, representing 2.5% of the total, after 7,200 branches were closed in 2011. The region has 20K fewer branches than it had when the financial industry was hit by the crisis in 2008.  5.7% of Greek bank branches were closed in 2012, while 4.9% were eliminated in Spain, -3.3% in Ireland, and -3.1% in Italy. The contraction was partially offset by branch increases in some eastern European countries. 


Overall, the EU banking system continues to slowly heal. Systemic risk measures of Europe's banking system, such as Euribor-OIS, have been benign now for almost a year having fully renormalized back in Sep/Oct 2012.


European Banking Monitor: Eerily Quiet? - zz.banks


Sovereign CDS – Sovereign credit default swaps were mixed, though largely uneventful last week. Italy and Spain tightened by 7 and 9 bps, respectively, while Portugal widened by 4 bps. Elsewhere there was very little movement. 


European Banking Monitor: Eerily Quiet? - zz. sov1


European Banking Monitor: Eerily Quiet? - zz. sov2


European Banking Monitor: Eerily Quiet? - zz. sov3


Euribor-OIS Spread – The Euribor-OIS spread was unchanged week-oer-week at 12 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: Eerily Quiet? - zz. euribor

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