Toss in contingent liabilities for the banks, local governments, and things like the railway system, and even optimists put the number at 90%. Pessimists put it at 200% or higher, Greek territory. Remember, Irish government finances were the envy of the world until its real estate boom went bust. In any case, “China’s fiscal resources are
(Extract from page 22 of BIS Quarterly Review, September 2011)
Recently, there has been a substantial amount of interest in the extent to which the category “guarantees extended” 1 of the BIS consolidated banking statistics on an ultimate risk basis could be used as a proxy for the credit default swap (CDS) exposures of
by JW n FL
“All other off-balance sheet liabilities. Report all significant types of off-balance sheet
liabilities not covered in other items of this schedule. Exclude all items which are required to
be reported as liabilities on the balance sheet of the Report of Condition (Schedule RC),
contingent liabilities arising in connection with litigation in
The main implication being that sovereign paper now assumes the characteristics of a credit instrument – the price mainly reflects probability of default.
The blog post:
By José Viñals
The risk free nature of government bonds, one of the cornerstones of the global financial system, has come into question as the global crisis unfolds.
One thing is