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March 18, 2008

U.S. Banks Riskier Than Third-World Countries

The cost of insuring debt on some U.S. banks is higher than the cost of doing same for many third-world countries. Consider the spread on bank credit-default swaps, with Lehman currently more expensive to insure than Nigerian debt.

But that's not all:

In credit derivative swaps markets, Turkey was trading at the same level as British bank HBOS , while healthy Brazil with credit derivatives swaps at 191/197 basis points was roughly level with Royal Bank of Scotland, BB Securities said.

That was despite worries over Turkey's wide current account deficit and concerns over an attempt by the country's secular prosecutors to ban the ruling party from politics for allegedly trying to build an Islamic state.

And the best quote from Reuters on the subject is this:

"I think with Africa people feel they know what they are dealing with," said [one bank economist]. "In contrast, everything else is a great unknown."

Now there's a contrast for you: The U.S. financial crises is newly making African debt seem like a (relative) safe haven.

[via Reuters]

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