Our Experts Comment the Times Series

See All the Comments

Washer + Dryer = Wider

05 March 2019 by jbchevrel

Dutch banks came under pressure in late morning, ING leading the way (snr CDS +3 sub CDS +6). That is because Dutch banks were mentioned in a Russian money laundering case in the paper Telegraaf. Indeed, some leaked documents from 2 Lithuanian banks suggest Rabobank, ABN Amro and ING have been involved in a major Russian money laundering case in which billions of euros were laundered in Europe and the US. The documents show they were involved in payments that have the characteristics of money laundering, and almost €1bn passed from Lithuanian banks to Dutch bank accounts. The Danske Bank saga shows us that this type of stories can hurt CDS, although the names are well capitalised (fully loaded CET1: ABN 18.4% ING 11.4% Rabo 16%). That largely helped the SnrFin index to widen from 74 ½ to 77 in London late morning. Elsewhere, swiss banks were also underperforming as the Italian financial police demanded them to disclose the names of bankers working in Italy. This is less than a month after a French court ordered UBS to pay €5B for helping French clients to launder their assets. The upcoming iTraxx roll, the more positive Brexit outlook and the expectation of a new round of ECB TLTROs have largely contributed to pull European financial CDS tighter year to date. Thus, the sector is vulnerable to a reversal, and has differentiated itself by seeing some appetite to bid single-name protection.