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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 


Key Takeaway:

Last week saw another wild ride as the market entered the week with rising concerns about the fallout of falling oil and a potential Russian collapse, but exited the week on a higher note in response to the Fed and ECB talking about delaying rate hikes and potentially purchasing assets, respectively. Most of the CDS gauges, on average, ended little changed on the week. 

Looking ahead, headwinds prevail. Rising concerns around credit quality fallout in oil-sensitive areas are coupled to ongoing pressure in yield spreads. Translation: rising revenue pressure in conjunction with growing provision expense.

European Financial CDS - Swaps mostly widened in Europe last week, but results were somewhat mixed.  15 institutions' CDS tightened while 21 widened. Russia's Sberbank CDS continued to widen, increasing by 16 bps.  Sberbank's risk profile is well into the red with CDS at 583 bps.  

European Banking Monitor: Sberbank CDS Continued Wider - chart1 financials cds

Sovereign CDS – Sovereign swaps mostly tightened over last week, particularly across Europe. The catalyst for tightening was the Fed signaling it would not raise rates in the near future, and the ECB signaling it is ready to pursue asset purchases.

European Banking Monitor: Sberbank CDS Continued Wider - chart2 sovereign CDS

European Banking Monitor: Sberbank CDS Continued Wider - chart3 sovereign cds

European Banking Monitor: Sberbank CDS Continued Wider - chart4 sovereign CDS

Euribor-OIS Spread – 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. The Euribor-OIS spread was unchanged at 8 bps.

European Banking Monitor: Sberbank CDS Continued Wider - chart5 eruibor OIS spread

Matthew Hedrick 


Ben Ryan