World’s champions, as of August 2009, January 2009 in brackets:

Nasdaq: 866% [1222%]
Shenzhen SE: 506% [232%]
Shanghai SE: 273% [110%]
Korea Exchange: 260% [209%]
Istanbul: 198% [161%]

Sovereign risk higher than last year.

The survey (pdf file) is intended to elicit market participants’ views about the prospects for financial stability in the United Kingdom.

One of the challenges that arises in resolving a cross-border bank crisis is that crisis resolution frameworks are largely designed to deal with domestic failures and to minimize the losses incurred by domestic stakeholders. As such, the current frameworks are not well suited to dealing with serious cross-border problems.

The absence of a multinational framework for sharing the fiscal burdens for such crises or insolvencies is, along with the fact that legal systems and the fiscal responsibility are national, a basic reason for the predominance of the territorial approach in resolving banking crises and insolvencies.

The future of securitisation: how to align incentives? by Ingo Fender and Janet Mitchell:
This article reviews the recent collapse of global securitisation markets and the loss of investor confidence in them. It then sets out measures that could be taken to revive and strengthen the securitisation process, including mechanisms based on retention requirements for originators. It ends with a number of simple implications for policymakers and market practitioners.

Central counterparties for over-the-counter derivatives by Stephen G Cecchetti, Jacob Gyntelberg and Marc Hollanders:
Wider use of central counterparties (CCPs) for over-the-counter derivatives has the potential to improve market resilience by lowering counterparty risk and increasing transparency. However, CCPs alone are not sufficient to ensure the resilience and efficiency of derivatives markets.

Unweighted average of the banks indicated, in basis points:

Timeline of events and changes in the CDS premia of US banks

The Spanish flu was the third deadliest pandemic in history, trailing only the plagues of the sixth and fourteenth centuries. At the peak of the influenza, much of the nation’s resources were simultaneously being directed toward the war effort in Europe. Under these conditions, the U.S. economy contracted, and GDP dipped. However, the evidence suggests that the payment system and financial services industry weathered the pandemic well. Restricted flow of information was bullish for the stock market:

Most financial markets remained open during the crisis. In fact, stock prices and volumes on the New York Stock Exchange were surprisingly unaffected by the pandemic. By the end of 1918, the Dow Jones Industrial Average was up 10.5 percent for the year and continued its upward climb, experiencing a 30 percent post-war rally in early 1919.The Dow also reached its high for 1918 in mid-October, when the pandemic was at its peak. Furthermore, trading volume on the NYSE showed an upward trend during the height of the epidemic. Cooper and Grinder offer three primary reasons why the market was not affected. They suggest press censorship kept investors from knowing the extent of the epidemic, news about the war overwhelmed influenza news, and government officials downplayed the severity of the disease to the public. The lack of immediate public awareness to the pandemic’s severity and the impact of World War I are two factors that may have diminished the effects of the pandemic on the financial markets.

Amid the current financial crisis, there has been one equity index beating all others: the Shanghai Composite. Our analysis of this main Chinese equity index shows clear signatures of a bubble build up and we go on to predict its most likely crash date: July 17-27, 2009 (20%/80% quantile confidence interval).

Note: the drop doesn’t mean that the Fed has reduced liquidity, it has been replaced by securities held outright.

This review (pdf) shows that the global financial turmoil, despite having a very marked impact on overall financial market activity, has not triggered any notable shifts in the currency preferences of market participants. As a result, the international role of the euro, when measured relative to the international role of other currencies, remained fairly stable during the review period. This also applies to recent developments following the intensification of the financial market turmoil in September 2008. All in all, this finding corroborates the conclusion of earlier reviews that the international role of currencies tends to be relatively stable over time.

Currency composition of global foreign exchange reserves:

Switzerland is a new entry this quarter after engaging in quantitative easing; Portugal has dropped out in the wake of a downgrade by S&P and is now ranked 14^th.
Before you ask, the U.K. is ranked 18^th, behind China (17^th).

Berkshire Hathaway Inc. (BRK.A) has drastically reduced its property catastrophe reinsurance capacity because of concerns that large losses could lead to liquidity problems or put more pressure on its ratings.

U.S. bank CDS' widening further:

Bank of America Corp (BAC): 263 bps +31
Wells Fargo & Company (WFC): 158 bps +13
JP Morgan Chase & Co (JPM): 110 bps +3
Morgan Stanley (MS): 231 bps +6
Goldman Sachs Group Inc (GS): 157 bps +2

Huge drop in central bank liquidity swaps - to $184,932 down $51,527. [Federal Reserve Statistical Release here.]

The week ended May 13^th was the second largest ever increase, $34.735 billion, in marketable securities held in custody for foreign official and international accounts.
The week just ended was the 13th largest ever.
336 weekly data points, starting December 18^th, 2002.