Section 3:
Institutional risks
materialise
Chart 3.1 Major UK banks’ and LCFIs’ credit default swap
premia(a)(b)
Sources: Markit Group Limited, Thomson Datastream, published accounts and Bank calculations.
(a) Data to close of business on 20 October 2008.
(b) Asset-weighted average five-year premia.
(c) April 2008 Report.
Chart 3.2 UK GDP growth forecast dispersion and major UK
banks’ credit default swap premia
Sources: Consensus Economics Inc., Markit Group Limited, Thomson Datastream and Bank calculations.
(a) Based on the standard deviation of forecasts of current and year-ahead GDP growth collected by Consensus Economics Inc. A value of one indicates
average dispersion of forecasts between January 1998 and October 2008.
(b) Monthly average of asset-weighted five-year CDS premia except for last estimate, which is the average to close of business on 20 October 2008.
Table 3.A Major central bank operational announcements since
April 2008(a)
May
Bank of England
Federal Reserve
Announced that expanded
three-month long-term repos
would be maintained in June and July.
Expanded size of Term Auction
Facility (TAF).
European Central Bank
Co-ordinated central bank
announcements(b)
Expansion of agreements between
Federal Reserve and European Central
Bank.
Extended collateral of Term Securities
Lending Facility (TSLF).
July
Introduced 84-day TAF.
Primary Dealer Credit Facility (PDCF)
and TSLF extended to January 2009.
September
Announced that expanded
three-month long-term repos
would be maintained in September
and October.
Announced long-term repo
operations to be held weekly.
Announced that it would conduct
operations under the 84-day TAF to
provide US dollars to European Central
Bank counterparties.
Authorised the auction of options for
primary dealers to borrow Treasury
securities from the TSLF.
Announced that supplementary
three-month longer-term refinancing
operations (LTROs) would be renewed
in August and September.
Expanded collateral of PDCF.
Announced six-month LTROs would
be renewed in October, and
three-month LTROs would be renewed
in November and December.
Expanded size and collateral of TSLF.
Announced provision of loans to banks
to finance purchase of high quality
asset-backed commercial paper
from money market mutual funds.
Conducted Special Term Refinancing
Operation.
Extended drawdown period
for Special Liquidity Scheme
(SLS).
October
Extended collateral for one-week
US dollar repos and for three-month
long-term repos.
Extended collateral of all
extended-collateral sterling
long-term repo operations,
US dollar repo operations, and the
SLS to include bank-guaranteed
debt under HM Government’s bank
debt guarantee scheme.
Expansion of agreements
between Federal Reserve and
European Central Bank.
Establishment of swap agreements
between Federal Reserve and
Bank of England, subsequently expanded.
Bank of England and European Central
Bank, in conjunction with Federal Reserve,
announced operation to lend US dollars
for one week over quarter end,
subsequently extended to scheduled
weekly operations.
Announced payment of interest on
required and excess reserve balances.
Increased size of six-month
supplementary LTROs.
Increased size of TAFs.
Announced reduction in corridor of
standing facilities from 200 basis points
to 100 basis points around the
interest rate on the main refinancing
operation.
Announced creation of the
Commercial Paper Funding Facility.
Introduced swap agreements with
Swiss National Bank. of funding.
Announced schedules for TAFs and
Forward TAFs for auctions of US dollar
liquidity during the fourth quarter.
European Central Bank and
Bank of England announced tenders of
US dollar funding at 7-day, 28-day, 84-day
maturities at fixed interest rates for
full allotment. Swap agreements
increased to accommodate required level
Announced Operational Standing
Facilities and a Discount Window Facility,
which together replace existing Standing
Facilities.
Sources: Bank of England, European Central Bank and Federal Reserve.
(a) Data to close of business on 20 October 2008.
(b) Co-ordinated actions also involved on one or more occasions some or all of the Bank of Canada, Bank of Japan, Danmarks Nationalbank, Norges Bank, Reserve Bank of Australia, Sveriges Riksba
Chart 3.3 Three-month interbank rates relative to expected
policy rates(a)(b)
Sources: Bloomberg and Bank calculations.
(a)
(b)
(c)
(d)
(e)
Spread of three-month Libor to three-month overnight indexed swap rates.
Data to close of business on 20 October 2008.
April 2008 Report.
Fannie Mae and Freddie Mac taken into conservatorship.
Lehman Brothers Holdings files for Chapter 11 bankruptcy protection.
Chart 3.4 Equity prices of distressed institutions(a)
Sources: Bloomberg and Bank calculations.
(a)
(b)
(c)
(d)
(e)
Data to close of business on 20 October 2008.
Fannie Mae and Freddie Mac taken into conservatorship.
Lehman Brothers Holdings files for Chapter 11 bankruptcy protection.
Benelux, Icelandic and UK governments nationalise or take stakes in banks.
UK authorities announce comprehensive package of measures.
Chart 3.5 Capital positions of Fannie Mae and Freddie Mac
Sources: Bloomberg and published accounts.
Chart 3.6 US securities’ houses exposures to structured credit
as a proportion of total assets at end-2008 Q3(a)
Sources: Published accounts and Bank calculations.
(a) Includes exposures to leveraged loans and asset-backed securities where details disclosed by firms.
Chart 3.7 Major UK banks’ and LCFIs’ market capitalisation
Sources: Bloomberg and Bank calculations.
Chart 3.8 90-day US Treasury bill yield(a)
Source: Global Financial Data.
(a) Data to close of business on 20 October 2008.
Chart A Outstanding notional amounts of derivatives
Source: BIS.
Chart B Gross market value and net credit exposures in
OTC derivatives
Source: BIS.
Chart 3.9 US money market mutual funds’ total assets under
management(a)
Sources: Bloomberg and Investment Company Institute.
(a) Comprises US dollar assets of retail and institutional funds.
(b) Lehman Brothers Holdings files for Chapter 11 bankruptcy protection.
(c) US Treasury announces temporary guarantee programme for US money market mutual funds.
Chart 3.10 Maturity profile of US commercial paper
issuance(a)
Source: Board of Governors of the Federal Reserve System.
(a) Data to close of business on 20 October 2008.