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Overview

Overview. Chart 1 Tail risk (a). (a) In this simple schematic diagram, the distribution of possible events is assumed to be normal. (b) Probability density. Chart 2 Speculative-grade corporate bond default rate forecasts. Source: Moody’s Investors Service.

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Overview

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  1. Overview

  2. Chart 1 Tail risk(a) (a) In this simple schematic diagram, the distribution of possible events is assumed to be normal. (b) Probability density.

  3. Chart 2 Speculative-grade corporate bond default rate forecasts Source: Moody’s Investors Service.

  4. Chart 3 Global quarterly syndicated loan issuance Sources: Dealogic and Bank calculations

  5. Chart 4 Arrears of 60+ days on US second-lien sub-prime home equity loans(a) Source: JPMorgan Chase & Co. (a) Year refers to year of securitisation.

  6. Chart 5 Equity prices Sources: Bloomberg, MSCI and Bank calculations. (a) July 2006 Report

  7. Chart 6 EME sovereign US$ bond spreads and credit ratings(a) Sources: Bloomberg, JPMorgan Chase & Co. and Standard & Poor’s. (a) Lines represent logarithmic best-fit lines. Ratings are plotted linearly. Outliers with ratings below CCC in June 2004 (Argentina and Dominican Republic) are not shown. (b) Trough of US interestrate cycle.

  8. Chart 7 Decomposition of borrowing costs for UK high-yield corporates(a) Sources: Bloomberg, Merrill Lynch, Thomson Datastream and Bank calculations. (a) The decomposition assumes a debt maturity of 20 years. For details, see Churm, R and Panigirtzoglou, N (2005), ‘Decomposing credit spreads’, Bank of England Working Paper no. 253.

  9. Chart 8 UK PNFCs’(a) capital gearing(b) Sources:ONS and Bank calculations. (a) Private non-financial corporations. (b) Gearing is calculated as the ratio of debt, net of liquid assets, to the market value or replacement cost of capital.

  10. Chart 9 US implied forward corporate credit spreads(a) • Sources: Merrill Lynch and Bank calculations. • One-year forward spread over swaps for BBB US corporate bonds.

  11. Chart 10 LCFIs’ total assets Sources: Bloomberg, SEC filings, published accounts and Bank calculations. (a) Other includes (among other items) receivables, investments, goodwill and property.

  12. Table A Change in assessment since the July 2006 Report Source: Bank calculations. (a) Assessed change in the probability of a vulnerability being triggered over the next three years. (b) Assessed change in the expected impact on the UK financial system if a vulnerability is triggered

  13. Chart 11 Major UK banks’ and LCFIs’ credit default swap premia(a) Sources: Bloomberg, Markit Group Limited, published accounts and Bank calculations. (a) Asset-weighted average five-year premia. (b) July 2006 Report

  14. Chart 12 Major UK banks’ pre-tax return on equity(a)(b) Sources: Published accounts and Bank calculations (a) Data for major UK banks, excluding building societies. (b) Pre-tax return on equity calculated as pre-tax profit as a proportion of shareholders’ funds and minority interests

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