Why now is the time to secure your cash depoists;

As Credit Default Swaps (CDS) rise, so does risk!

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The financial markets are once again flashingwarning signs. Recent spikes in the cost of Credit Default Swaps (CDS) tied tomajor banks are highlighting growing concern about credit risk in the financialsystem. For investors and institutions holding significant amounts of unsecuredcash, this is a moment that demands attention—and swift action.

What the rising cost of CDS is telling us

CDS contracts function as a form of insuranceagainst the default of a borrower. When the cost of a CDS rises, it reflectsthe market’s perception that the likelihood of default is increasing. Over thepast few weeks, the cost of insuring against bank defaults has climbed notably,suggesting that investors are growing uneasy about the ability of certain banksto weather ongoing economic pressures.

This is not merely a theoretical concern.Rising CDS spreads are a clear, market-driven indicator that banks are becomingriskier places to leave unsecured funds. Whether due to politicaluncertainty, persistent inflation, or exposure to high-risk sectors, banks arefacing growing scrutiny, and so too should the decisions made by depositors.

Unsecured cash is not risk-free

Many institutions continue to leave largecash balances on deposit, often without questioning the underlyingcreditworthiness of the banks holding their money. But as CDS spreads widen,this complacency could prove costly. Unsecured deposits are exactly that, unsecured.In a worst-case scenario, these funds could be subject to delays, bail-ins, orworse.

The current environment is making itincreasingly clear that treating all deposit options as equally safe is nolonger prudent. It is time to reassess.

A better approach: Secured Deposits in a rising-risk environment

Fortunately, there are safer alternatives.Secured deposit products, those backed by high-quality collateral or structuredvia reverse-repo-based mechanisms, offer a compelling solution. These productsallow institutions to keep cash working, without taking on unnecessary creditexposure.

As banks face higher funding costs and risingCDS premiums, they are also offering more competitive rates on securedstructures to attract stable capital. This creates a window where security andyield do not have to be mutually exclusive.

Final thought

The rising cost of CDS protection is not justa market curiosity, it is a signal. A signal that unsecured exposure to banksis getting riskier. A signal that credit risk is rising even in corners of themarket once deemed safe. And perhaps most importantly, a signal that now is theright time to move cash into secured deposits that protect againstprecisely this kind of uncertainty.

In volatile times, preserving capital is justas important as growing it. With spreads wide and risk premium high, this is amoment of both caution and opportunity.

When cash deposits are secured againsthigh-quality government bonds, the interest rates are often comparable to, oreven higher than, those offered on unsecured deposits. In fact, yieldstypically improve further depending on the quality of the collateral selected.When factoring in the cost of a CDS alongside the returns on unsecured cash,secured deposits become significantly more attractive, offering far superiorrisk-adjusted returns.

Access to the reverse repo market, however,remains out of reach for many due to substantial barriers to entry. Even someof the largest institutions lack direct access. This is precisely where Consort1 steps in.

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To effortlessly secure your cash deposits, choose from a broad range of collateral, and access higher, more stable yields, contact us today:

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📧enquiries@consort1.com

🌐 www.consort1.com

📞 020 8142 8888

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