Banks In Trouble. Again

Posted on: 05-10-2011 in Finance

Here are a couple of interesting charts taken from Bespoke: Trouble in Financial Land. The first shows the percentage change in credit default swap (CDS) prices for major banks.  A CDS is like an insurance policy.   It obliges the seller of the CDS to compensate the buyer in the event of loan default.  High CDS prices, therefore, represent a higher probability that the underlying company, banks, in this case, will default on their debt obligations. It’s interesting that so far this year the price of insuring against default has risen the most for two U.S. banks, Morgan Stanley and Goldman Sachs.  With the trouble Europe’s banks are in you might have expected them to be top of the list. The second chart shows the percentage decline in banks stocks in 2011. Clearly, it’s the banks that have taken the brunt of the market falls so far in 2011.