Banks still seen as risky five years after start of crisis

Investors see big banks as riskier than before the first flames of the financial crisis flared five years ago and probably always will, according to a new report from Moody's Analytics, a sister company of the bond-rating agency.
Risk premiums for bank debt are "highly unlikely ever to return to their former levels, both in the U.S. and Europe," according to the report by a team led by David Munves.
For big U.S. and European banks, the cost of credit default insurance, a measure of investor fear, is still nearly 20 times as high as it was in early July 2007 before the failure of two Bear Stearns hedge funds. The funds were filled with mortgage-related securities and funded largely with short-term instruments.
Among the reasons cited for the persistent doubts among bank investors are steps governments are taking to make creditors bear more of the losses of future bank failures. For example, nine major banks were required to submit to U.S. regulators on July 1 so-called "living wills" that map out steps to take to liquidate mortally wounded institutions and turn creditors' claims into losses or stock.

Read more: http://www.reuters.com/article/2012/07/17/us-banks-risk-moodys-idUSBRE86G04N20120717