US bank CDS spreads spike following US downgrade

Spreads on Bank of America spike following US debt downgrade and news of AIG lawsuit; other US names also widen

Credit default swap (CDS) spreads on US banks have widened sharply following last week's decision by rating agency Standard & Poor's (S&P) to remove its AAA rating from US government bonds.

Rating agencies had warned earlier this year that failure by US politicians to set out a long-term plan to deal with the country's large debt burden would endanger its credit rating. Despite a last-minute agreement to raise the debt ceiling – which the US Congress hammered out before an August 2 deadline – S