High Credit-Default Swaps for Iceland’s Banks Skip to content

High Credit-Default Swaps for Iceland’s Banks

By Iceland Review

Debt risk soared as credit-default swaps reached a historic high at the Icelandic banks on Monday. The swaps rose by 12 basis points in Kaupthing Bank, bringing them up to 120. At Glitnir Bank, the basis points rose by 13 points and are currently at 115.

According to Vidskiptabladid business daily, the reason is lack of movable cash on international markets and increased avoidance of risk-taking due to the underlying mortgage crisis in the US.

Before the disturbances in the US real estate market began July 10, the credit-default swaps at both Kaupthing and Glitnir Banks were measured at 35 basis points.

Basis points, which measure credit default-swaps, are often used as indicators for how trustworthy banks are on the international economic market.

The lower the points, the better. High points hinder banks’ access to loan capital, causing a recession of bonds. The current credit-default swap situation could thus influence Kaupthing and Glitnir Banks’ investment opportunities.

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