Free Scorecard
The Banking Risk Radar
Score every banking relationship in your portfolio.Find the risks your credit ratings are not showing you.
Excel spreadsheet. No email required. Fill in your banks, get red/amber/green in 10 minutes.
Your rating agencies rated Credit Suisse investment-grade five months after markets priced it as junk. They rated SVB A3 until two days before seizure, then dropped it 13 notches in a single day. Lehman Brothers held an A rating six days before filing the largest bankruptcy in US history.
Ratings are backward-looking opinions updated on an issuer-pays schedule. They are not early warnings. They are obituaries published after the funeral.
This scorecard gives you what ratings cannot: a structured framework for identifying banking counterparty risk using forward-looking market and fundamental data, months before a crisis becomes public.
Every input in this scorecard is publicly available. No client data, no position sizes, no account details required.
The Three Signals That Catch Every Bank Failure
Academic research (Blanco, Brennan, and Marsh 2005; Gropp, Vesala, and Vulpes 2006) and five major bank failure case studies converge on three signals. Applied retrospectively, this combination would have provided advance warning in every case: Credit Suisse, SVB, Lehman Brothers, Northern Rock, and Banco Popular.
| Signal | What to Watch | Lead Time |
|---|---|---|
| 1. Structural balance sheet | Uninsured deposit concentration, wholesale funding dependency, HTM portfolio size, NPL ratio | 12-36 months |
| 2. CDS spread trajectory | Absolute level, rate of change, curve inversion (1Y > 5Y) | 3-9 months |
| 3. Equity relative performance | 6-month return versus sector benchmark | 7-13 months |
Decision rule:
- • One signal fires: investigate. Increase monitoring frequency for that bank.
- • Two signals fire simultaneously: escalate. Brief your investment committee. Review exposure.
- • All three fire: activate your exit plan.
Your Primary Warning System
Part 1: CDS Spreads
83% of credit risk price discovery occurs in CDS markets (Blanco et al. 2005). CDS traders have their own capital at risk and update prices continuously. This makes CDS the single most reliable early warning indicator.
CDS Action Levels
| CDS Spread (bps) | Credit Equivalent | 5Y Default Probability | What to Do |
|---|---|---|---|
| < 50 | AAA / AA | < 4% | Routine quarterly review |
| 50-100 | A | 4-8% | Quarterly review; note the trend direction |
| 100-150 | BBB | 8-12% | Monthly review; track trajectory |
| 150-250 | BBB- / BB+ | 12-20% | Bi-weekly monitoring; flag to senior stakeholders |
| 250-400 | BB | 20-30% | Weekly monitoring; investigate fundamentals |
| 400-700 | BB- / B+ | 30-45% | Senior escalation; review all exposure limits |
| > 1,000 | CCC / CC | > 55% | Emergency response; activate exit plan |
Context matters: 120 bps for a Turkish BB- bank is normal. 120 bps for a Norwegian AA bank is a screaming red flag. Always compare against the bank's own trailing 12-month average and its sector peers.
CDS Curve Inversion: The Shortest-Horizon Warning
A normal CDS curve slopes upward: 5-year spread exceeds 1-year spread. When this inverts (1Y > 5Y), the market is pricing near-term default as more likely than long-term survival.
Credit Suisse's CDS curve inverted in January 2023, six weeks before its forced merger. When you see this, switch to daily monitoring.
Where to Find CDS Data
- • iTraxx Senior Financials index: Benchmark for 30 European bank CDS (Cbonds provides free delayed data)
- • DTCC public CDS data: Limited but free tenor information
- • Bloomberg CDSW function: Real-time, paid
If no CDS market exists for a bank (common for mid-cap and regional banks), fall back to equity signals and fundamental indicators. SVB had no liquid CDS market. The equity and fundamental signals still would have caught it 18 months early.
Part 2: Equity Relative Performance
Every failed bank in the historical dataset showed equity underperformance of more than 15% versus sector peers, 7-13 months before collapse. This signal is free, available for every listed bank, and requires no specialized data source.
How to Check
- 1. Pull the bank's stock price (6-month return)
- 2. Pull the sector benchmark return (KBW Bank Index for US, STOXX Europe 600 Banks for EU)
- 3. Subtract: bank return minus benchmark return
- 4. If the gap exceeds -15%, the signal is firing
| Relative Performance (6M) | Status | Action |
|---|---|---|
| Within 5% of benchmark | Green | Normal |
| Underperforming by 5-15% | Amber | Monitor monthly; cross-check CDS |
| Underperforming by > 15% | Red | Escalate; check if CDS confirms |
Part 3: Fundamental Scorecard (12 Indicators)
Fundamentals move slower than markets but reveal structural vulnerabilities that CDS may not fully price until crisis. SVB's 94% uninsured deposit concentration was visible in public FDIC data 18 months before failure. Nobody was looking.
Capital Strength
| # | Indicator | Green | Amber | Red |
|---|---|---|---|---|
| 1 | CET1 Ratio | > 13% | 10-13% | < 10% |
| 2 | Leverage Ratio | > 5% | 3.5-5% | < 3.5% |
Do not treat these as safety guarantees. Credit Suisse had 14.1% CET1 (green) throughout. SVB had 15.4% CET1 (green) while sitting on $15 billion in unrealized losses that would have made it insolvent if recognized. Capital ratios measure accounting compliance, not actual safety.
Asset Quality
| # | Indicator | Green | Amber | Red |
|---|---|---|---|---|
| 3 | NPL Ratio | < 3% | 3-5% | > 5% |
| 4 | Texas Ratio (NPLs / tangible equity + reserves) | < 50% | 50-80% | > 80% |
Liquidity and Funding
| # | Indicator | Green | Amber | Red |
|---|---|---|---|---|
| 5 | LCR (Liquidity Coverage Ratio) | > 140% | 110-140% | < 110% |
| 6 | NSFR (Net Stable Funding Ratio) | > 110% | 100-110% | < 100% |
| 7 | Uninsured Deposits (% of total) | < 40% | 40-60% | > 60% |
| 8 | Loan-to-Deposit Ratio | < 90% | 90-110% | > 110% |
The regulatory LCR model assumes a 30-day stress horizon. SVB lost $42 billion in deposits in a single day. Social-media-driven bank runs are faster than any regulatory liquidity model assumes. Uninsured deposit concentration (#7) is a better predictor of run vulnerability than LCR.
Profitability and Efficiency
| # | Indicator | Green | Amber | Red |
|---|---|---|---|---|
| 9 | Return on Assets (ROA) | > 0.8% | 0.3-0.8% | < 0.3% |
| 10 | Cost-to-Income Ratio | < 60% | 60-75% | > 75% |
Hidden Risks
| # | Indicator | Green | Amber | Red |
|---|---|---|---|---|
| 11 | IRRBB (EVE change under rate shock) | < 10% | 10-15% | > 15% |
| 12 | HTM Securities (% of total assets) | < 15% | 15-30% | > 30% |
Indicator #12 is what SVB teaches: Held-to-Maturity accounting lets banks avoid marking interest rate losses to market. SVB had $15 billion in unrealized HTM losses that were invisible in its capital ratios. If those losses had been recognized, CET1 would have dropped from 15.4% to below zero.
Scoring
- • One red indicator: Investigate. Check market signals for confirmation.
- • Two or more red indicators: Escalate to investment committee. Review total exposure.
- • Any red market signal (CDS or equity) overrides green fundamentals. Credit Suisse had green CET1 and green LCR throughout. The market was right. The ratios were not.
Part 4: Portfolio Heat Map
Fill in one row per banking relationship:
| Bank | Jurisdiction | Relationship Type | CDS (bps) | Equity vs Peers (6M) | Red Fundamentals (count) | Composite Status |
|---|---|---|---|---|---|---|
Concentration check:
- • Largest single-bank exposure: $_____ (___% of total deposits/assets held with them)
- • Total exposure to banks with any red signal: $_____ (___% of total)
- • Banks with CDS > 150 bps: ___
- • Banks with no CDS market (equity-only monitoring): ___
Part 5: Monitoring Cadence
| Portfolio Status | Frequency | Time Required | What to Check |
|---|---|---|---|
| All green | Quarterly | ~1 day total | Fundamental data pull, scorecard update |
| One bank amber | Monthly for that bank | ~3-4 hours/month | Add CDS trajectory, equity relative check |
| One bank red | Weekly for that bank | ~1.5 hours/week | All indicators, CDS curve shape, news |
| CDS > 400 or curve inverts | Daily for that bank | ~30 min/day | CDS, equity, deposit flow signals, news |
For a portfolio of 10-20 banking relationships with no active concerns: roughly one full day per quarter, plus an hour per week scanning market signals.
For a portfolio of 20+ banking relationships with 2-3 on the watch list: roughly 4-6 hours per week ongoing.
The Proof: Two Retrospectives
Credit Suisse (failed March 2023)
| Date | CDS (bps) | Rating (S&P) | CET1 | Signal |
|---|---|---|---|---|
| Feb 2022 | 65-100 | BBB+ | 13.7% | CDS trending up. First amber. |
| Jun 2022 | 200 | BBB+ | 13.5% | CDS crosses early warning threshold. Rating agencies: no change. This scorecard: escalate. |
| Nov 2022 | 400 | BBB+ (watch negative) | 14.1% | Crisis confirmation. CHF 110B in deposit outflows that quarter. |
| Jan 2023 | Curve inverts | BBB- (downgraded) | ~14% | Imminent warning. Six weeks to failure. |
| Mar 2023 | 1,082 | Suspended | N/A | Forced UBS merger. AT1 bonds wiped out. |
Lead time with this scorecard: 9 months. Lead time with credit ratings: days.
Silicon Valley Bank (failed March 2023)
| Date | Key Indicator | Rating (Moody's) | CET1 | Signal |
|---|---|---|---|---|
| Mid-2021 | Uninsured deposits: 94% | A3 | 15.4% | Extreme structural red. Visible in public FDIC data. |
| Late 2021 | HTM portfolio: >40% of assets | A3 | 15.4% | Second structural red. Two reds = escalate. |
| Sep 2022 | $15B unrealized HTM losses disclosed | A3 | 15.4% | If recognized, CET1 drops below zero. |
| Mar 8, 2023 | Announces $1.8B loss on securities sale | A3 | ~15% | |
| Mar 9, 2023 | $42B in deposit withdrawals (single day) | A3 → C (13 notches) | N/A | FDIC seizure. |
Lead time with this scorecard: 18+ months (structural indicators). Lead time with credit ratings: 2 days.
What This Scorecard Cannot Do
This is a point-in-time manual exercise. It tells you where you stand today.
It does not:
- • Update automatically as CDS spreads move
- • Alert you when an indicator crosses a threshold
- • Track trends over time (is a bank improving or deteriorating?)
- • Decompose CDS moves into systemic versus bank-specific components
- • Scale to 20+ banking relationships without consuming your week
- • Monitor jurisdictions where data access is non-trivial
For a 5-bank portfolio, this scorecard is manageable. For 15 or more banking relationships, the manual monitoring burden becomes a full-time job.
What Continuous Automated Monitoring Looks Like
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Zero Data Exposure Guarantee
We never see your client names, position sizes, or account details. The only input we need is a list of bank names and stock tickers. If our entire system were compromised, an attacker would learn nothing about your families. Your data never leaves your office because it never enters ours.
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