Goldman Sachs debt insurance cost on the rise

4 May 2010

The cost of insurance against Goldman Sachs defaulting on its debts has risen in the wake of the allegations made against the bank by the Securities and Exchange Commission (SEC).

Rates for credit default swaps in Goldman Sachs have risen by 80 per cent since the fraud charges were brought against the bank, according to figures from Markit.

This means the price of insuring $10 million worth of debt in the firm now stands at $162,000 per year, reports the Financial Times.

On April 15th 2010 – 24 hours before charges were made against Goldman Sachs by the SEC – this stood at around $30,000 less.

The new level puts Goldman Sachs on a par with rivals such as Citigroup and Morgan Stanley, two less profitable firms.

Last month, the bank recorded a profit of $3.46 billion for its activities in the first quarter of the year.

At the time of the announcement, Lloyd Blankfein, the chairman and chief executive officer of Goldman Sachs, thanked shareholders and clients for sticking by the bank following the SEC allegations.

The regulator has claimed that the bank encouraged clients to bet on bad investment positions in the housing market.

By Tony Aynsley

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