How Safe is your Bank (pre-Bear Stearns implosion)

The ever brilliant FT Alphaville Markets Live posted a Credit Suisse note earlier with credit default swap numbers for the UK banks:

UK bank CDS are fairly flat with A&L at 375bps, Barclays 163bps, B&B 425bps, HBOS 245bps, HSBC 145bps, Lloyds TSB 133bps, RBS 205bps, and Standard Chartered 143bps. It is interesting to note that HBOS CDS is now similar to levels where A&L and B&B were trading just a few weeks ago. Credit market commentators continues to cite confusion around the decision to issue non-equity tier 1 (particularly given they are already close to maximum headroom on the innovative).

For those who think the above is gobbledegook: A “CDS” Is a Credit Default Swap – a complex mechanism that insurances against a company defaulting. The “bps” is simply basis points (1/100th of 1%) – the cost of insuring the debt of that institution. The higher the bps the more risk the financial markets think there is in holding that banks’ paper.

Here’s my own chart of the above data (click for full size picture):

Note: many foreign banks operating in the UK are considered a far higher risk than Bradford & Bingley, including the Icelandic and Indian options.

Tags: Credit Default Swaps, UK Banks