This figure comes by way of FT Alphaville, and charts the ratio of outstanding bank liabilities to national GDP for Eurozone and G10 countries.
These measures are important because they are an integral part of the bail out process. Governments hoping to backstop their bank's debt must have a national income that can offset balance sheet losses. Once these liability levels start rocketing above the 100% level (outstanding debts exceeding GDP) individual banks become too big to save.
With the economic glitterati in Davos, let's take a look a Switzerland. According to FT, UBS has a balance sheet of $2 trillion and Credit Suisse has about another $1 trillion. While not fully all of these assets are distressed (credit worthy borrowers are still repaying loans), this $3 trillion exposure is some 10 times the Swiss economy.
There has been plenty of deserved blame leveled against the US, and this chart is surely of little comfort to bankers in America. Still, take note of that much smaller block on the right.
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Just a note to readers: There have been some complaints about these data, collected by Dresdner. I will try to find the appropriate statistics and make any changes necessary.
For those of you following the blog today, I changed the graph once the correct data were input. The new figure makes Ireland look a little better, but still the picture is grim for much of the Euro area.
Remember when Greece was facing a rocket-fueled CDS spread? It appears that Ireland is now the Eurozone country most likely to default, as protection against Irish bonds rose to 262.5 basis points. Just to review, that means an investor holding Irish debt would need to pay 2.625% of the notional value of the bond each year to hedge against default.
Any comment on what this number looks like for china?
and looks like at more 'normal' times?
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