Overview
Chart 1 Tail risk(a)
(a) In this simple schematic diagram, the distribution of possible events is assumed to be normal.
(b) Probability density.
Chart 2 Speculative-grade corporate bond default rate forecasts
Source: Moody’s Investors Service.
Chart 3 Global quarterly syndicated loan issuance
Sources: Dealogic and Bank calculations
Chart 4 Arrears of 60+ days on US second-lien
sub-prime home equity loans(a)
Source: JPMorgan Chase & Co.
(a) Year refers to year of securitisation.
Chart 5 Equity prices
Sources: Bloomberg, MSCI and Bank calculations.
(a) July 2006 Report
Chart 6 EME sovereign US$ bond spreads and credit
ratings(a)
Sources: Bloomberg, JPMorgan Chase & Co. and Standard & Poor’s.
(a) Lines represent logarithmic best-fit lines. Ratings are plotted linearly. Outliers with ratings below CCC in June 2004
(Argentina and Dominican Republic) are not shown.
(b) Trough of US interest rate cycle.
Chart 7 Decomposition of borrowing costs for UK
high-yield corporates(a)
Sources: Bloomberg, Merrill Lynch, Thomson Datastream and Bank calculations.
(a) The decomposition assumes a debt maturity of 20 years. For details, see Churm, R and Panigirtzoglou, N (2005),
‘Decomposing credit spreads’, Bank of England Working Paper no. 253.
Chart 8 UK PNFCs’(a) capital gearing(b)
Sources: ONS and Bank calculations.
(a) Private non-financial corporations.
(b) Gearing is calculated as the ratio of debt, net of liquid assets, to the market value or replacement cost of capital.
Chart 9 US implied forward corporate credit spreads(a)
Sources: Merrill Lynch and Bank calculations.
• One-year forward spread over swaps for BBB US corporate bonds.
Chart 10 LCFIs’ total assets
Sources: Bloomberg, SEC filings, published accounts and Bank calculations.
(a) Other includes (among other items) receivables, investments, goodwill and property.
Table A Change in assessment since the July 2006 Report
Source: Bank calculations.
(a) Assessed change in the probability of a vulnerability being triggered over the next three years.
(b) Assessed change in the expected impact on the UK financial system if a vulnerability is triggered
Chart 11 Major UK banks’ and LCFIs’ credit default swap premia(a)
Sources: Bloomberg, Markit Group Limited, published accounts and Bank calculations.
(a) Asset-weighted average five-year premia.
(b) July 2006 Report
Chart 12 Major UK banks’ pre-tax return on equity(a)(b)
Sources: Published accounts and Bank calculations
(a) Data for major UK banks, excluding building societies.
(b) Pre-tax return on equity calculated as pre-tax profit as a proportion of shareholders’ funds and minority interests