The following insight was written by our Secured Deposit Partners, Consort1.
Financial markets are twitching once more. One of the clearest signs? The cost of Credit Default Swaps (CDS) linked to major banks climbed in late March and early April. It may not make headlines every day, but in financial circles, it is one of the louder warning bells. For institutions or investors with meaningful cash holdings parked in unsecured accounts, now is the time to take a closer look at where that money is sitting, and why.
What Higher CDS Prices Are Really Signalling
At its heart, a CDS is insurance. If a borrower defaults, the CDS pays out. So when the cost of a CDS rises, it is the market’s way of saying, “This borrower looks shakier than before.” Prices climbed notably last month across some of the largest banks. The message is clear: cracks in confidence have emerged, and they shouldn’t be ignored
The reasons behind this shift vary, stubborn inflation, geopolitical uncertainty, or specific exposure to stressed sectors, but the message is clear: confidence in the banking sector is under strain. And when confidence wavers, so should blind trust in where your cash is kept.
Unsecured Deposits Carry More Risk Than You Might Think
It is surprisingly common for local authorities and other institutions to leave large sums sitting in current or call accounts without much thought to the creditworthiness of the bank. After all, we often assume deposits are safe by default. But in the current climate, that assumption is looking increasingly outdated.
Unsecured deposits are exactly what the name suggests. In a crisis, those funds could be delayed, frozen, or even subject to bail-in measures. It is a risk many have ignored for too long.
There Is a Smarter Option: Secured Deposits
The good news is there is a better way. Secured deposits, typically backed by high-quality collateral and structured in a repo-style format, offer a way to keep your cash productive without taking unnecessary risks.
As funding conditions tighten, banks are under pressure. That means they are more willing than ever to offer attractive returns through secured channels, giving local authorities a rare chance to combine yield and security.
The Takeaway
Spiking CDS prices are not just market noise. They are an early warning that credit risk is creeping into places many thought were rock solid. Rather than waiting for the headlines to catch up, this is the moment to act, by shifting cash into structures designed to withstand the storm.
Capital preservation matters just as much as growth, especially now. If you are holding meaningful sums in unsecured accounts, do not wait for volatility to force your hand.
Never before has it been so easy to place secured deposits. We have partnered with Consort1, a leader in providing easy access to secured deposits, for over two years and many of our local authority clients have taken advantage of securing their deposits.
Act today. For a seamless way to secure your deposits while improving your returns, contact Arlingclose:
Consort1 is the registered business name of Consort 1 Limited, which is regulated by the Jersey Financial Services Commission.
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