Financial Counterparty Credit Default Swaps Analysis
14 October 2008
The Treasury Leadership Roundtable is publishing this special edition of bank CDS analysis to provide members with
the most updated insights of financial counterparty risk from the credit market. Median CDS spread for the top 100
global syndicated loan banks declined from their September high of 151bps to 98pbs on October 14 after several
governments injected capital into major banks. As a result 16% of the institutions now have implied ratings higher
than their actual ratings, a dramatic change in two weeks. We welcome your feedback on this analysis and how we can
further support your counterparty risk analysis.
Treasury Leadership Roundtable®
What’s Next?
CDS Spreads Continue to Signal Troubling Increases in Counterparty Risk
Source: Bloomberg; Treasury Leadership Roundtable Research.
2007 Top 100 Global Syndicated Loan Underwriters' Credit Default Swap Spreads
Five-Year CDS Spreads, April 2007-October 14, 2008
0
50
100
150
200
250
300
350
Ap
r-0
7
Ma
y-0
7
Ju
n-0
7
Ju
l-0
7
Au
g-0
7
Se
p-0
7
Oc
t-0
7
No
v-0
7
De
c-0
7
Ja
n-0
8
Fe
b-0
8
Ma
r-0
8
Ap
r-0
8
Ma
y-0
8
Ju
n-0
8
Ju
l-0
8
Au
g-0
8
Se
p-0
8
Oc
t-0
8
CDS Spread (bps)3rd Quartile
Median
1st Quartile
Median for Non-Financial AA-Rated Companies
Has the Other Shoe Dropped?
The Significant Increase in CDS Spreads Could Indicate Future Credit Rating Downgrades
Top 100 Global Syndicated Loan Underwriters’ Implied Credit Ratings*
October 14, 2008
Source: Bloomberg; Treasury Leadership Roundtable Research.
Current S&P Rating
CDS Spread
(October 14)
CDS Market
Implied Rating
Implied Downgrade
(No. of Notches Below
Current)
1 JPMorgan Chase & Co
AA-
93.36
A-
3
2 Citigroup Inc
AA-
216.89
BB+
7
3 Bank of America Corp
AA-
103.09
A-
3
4 Royal Bank of Scotland PLC/The
AA-
82.07
A
2
5 Deutsche Bank AG
AA-
74.11
A
2
6 BNP Paribas
AA+
39.72
AAA
-1
7 Goldman Sachs Group Inc/The
AA-
319.49
BB+
7
8 Credit Suisse Group
A+
73.59
A
1
9 Barclays Bank PLC
AA
75.69
A
3
11 Wachovia Corp
A+
173.39
BBB
4