Bank and Broker Default Risk

At the start of the credit crisis, we created the Bespoke Bank and Broker CDS index that tracks default risk for the major financial companies around the world.

As shown in the historical chart of the index below, CDS prices (credit default swaps) skyrocketed during the worst of the crisis to levels never seen before as questions arose about our entire financial system falling apart. Since the March lows, our Bank and Broker CDS index has declined significantly as the system has regained its footing. CDS prices for the major financials recently reached their lowest levels since well before the Lehman bankruptcy.

The index remains in a downtrend, but in recent months the steepness of the decline has slowed and it is is trading more and more sideways. For default risk to get back to levels seen prior to the start of the collapse, the index still needs to fall another 50% or so.