For the second quarter of 2010, possibly reflecting the renewed financial market tensions following concerns about sovereign risk, banks generally reported a deterioration in their access to wholesale funding across all segments, but more intensely as regards access to short-term money markets and the markets for debt securities issuance. On balance, in the second quarter of 2010 around 30-40% of the banks surveyed (excluding those banks that replied “not applicable”) reported deteriorated access to money markets and around 40-50% of the banks reported deteriorated access to debt securities markets. In addition, true-sale securitisation of corporate loans and loans for house purchase also became somewhat more difficult in the second quarter of 2010. On balance, between 20% and 30% of the banks for which this business is relevant (around 60% of the sample group) reported deteriorated access to securitisation of respectively corporate loans and mortgage loans. Moreover, according to 37% of the banks for which this business is relevant (which is the case for 40% of the sample group), synthetic securitisation, i.e. the ability to transfer credit risk off balance sheet, deteriorated.It is unclear whether credit conditions have improved very much since the bank stress tests. While bank CDS spreads have tightened, Eurlibor has steadily risen which gives you a mixed message. The real problem for the European banks is their dependence on wholesale funding as opposed to more stable funding sources such as bank deposits.
Black Swan Insights