Global Banking - Regulator Envy.

by: canadian gal

Wed Mar 25, 2009 at 21:19:10 PM EDT



(cross posted at kickin it with cg)

Amid a global economic meltdown - Canada - with its highly regulated banking system has become the envy of the world.  In a survey by the World Economic Forum in October, with the financial crisis and bank failures that have shaken world markets - Canada was voted to have to world's soundest banking system followed by Sweden, Luxembourg and Australia.

Britain, which once ranked in the top five, has slipped to 44th place behind El Salvador and Peru, after a 50 billion pound ($86.5 billion) pledge this week by the government to bolster bank balance sheets.  The United States, where some of Wall Street's biggest financial names have collapsed in the fall, rated only 40, just behind Germany at 39, and smaller states such as Barbados, Estonia and even Namibia, in southern Africa.

The World Economic Forum's Global Competitiveness Report based its findings on opinions of executives, and handed banks a score between 1.0 (insolvent and possibly requiring a government bailout) and 7.0 (healthy, with sound balance sheets).  Canadian banks received 6.8, just ahead of Sweden (6.7), Luxembourg (6.7), Australia (6.7) and Denmark (6.7).  UK banks collectively scored 6.0, narrowly behind the United States, Germany and Botswana, all with 6.1. France, in 19th place, scored 6.5 for soundness, while Switzerland's banking system scored the same in 16th place, as did Singapore (13th).

The Globe and Mail's Report on Business created a neat little chart that summarizes how some banks around the world are doing:  

Canada
Ranked tops in the world by the World Economic Forum for soundness of banks. Canada's big five lenders all reported healthy profits in their most recent quarter, generally beating analysts' expectations. Tightly regulated, with cash-spewing retail banks that can offset losses in other areas of the business.

United States
There are 252 problem banks being tracked by the government's bank insurance program. In 2008, 25 banks failed, including household names like Washington Mutual. The government has rolled out numerous programs and spent at least $1-trillion (U.S.) in a bid to prop up the financial system, but there are no sure signs that the bailouts are working. The Federal Deposit Insurance Co. is now on track to seize 100 failed banks in 2009.

Brazil
The big economies in South America have had little trouble with bank failures resulting from stumbles on risky assets such as subprime mortgages. Still, they won't be immune to rising defaults from slowing economies, which will be a test of how far financial regulation and bank management have come in recent years.  

Iceland
The banking system of this tiny island nation -- which boasts a population half the size of Winnipeg -- represents probably the most spectacular rise and fall of the global financial meltdown. In 2003, Iceland's three main banks had just a few billion dollars of assets, but by 2006 this hit $140-billion (U.S.). Today, all three have failed and been nationalized in a bailout that's cost about $330,000 per citizen, leading to the collapse of the country's currency and economy.  

Sweden
Sweden faced a banking crisis in the 1990s, and was forced to remake its financial sector. This time around, while one bank has failed because of toxic assets, the country has mostly dodged the problems and Sweden's banking sector was ranked second only to Canada's for stability by the World Economic Forum. Exposure at some big banks to Eastern Europe could lead to loan losses.

Britain
The British government has been forced to bail out big lenders such as Lloyds Banking Group, Northern Rock Plc and Royal Bank of Scotland, which have been crippled by forays into risky mortgage products before the property market in the UK and in the U.S. fell apart.

Switzerland
The country's reputation as the home of the quiet, prudent banker is in shambles after gambles by Swiss giants UBS AG and Credit Suisse led to massive losses totalling more than $65-billion (U.S.). The government is now looking to write new rules to keep the financial sector out of trouble.

Austria
Austria has historically been the bridge between Western Europe and Eastern Europe. In recent years some of its largest lenders focused on expansion in such countries as Czech Republic, Romania and the Ukraine. Lending to the Central and Eastern European region amounts to almost 70 per cent of Austria's gross domestic product, according to Moody's. That was great when those countries were booming, but Eastern Europe is hurting badly and now many loans are likely to go bad.

Spain
Spain's banking system has held up better than most with banks reporting gains in profit in large part because of strict regulatation when it comes to high risk assets, a legacy of a banking crisis in the 1970s. As a result, big Spanish banks like Banco Santander focus mostly on low-risk retail banking. Still, there are signs it may not last. The country's swooning property market could lead to loan defaults, and the government and some bank executives warn that the domestic banking sector may have to be restructured should the global financial crisis deepen.

Namibia
Namibia has the highest-ranked banking system in Africa for stability, well ahead of Spain, the U.S. and Britain. According to the International Monetary Fund, the country's banks entered the financial crisis very profitable and well capitalized. And while the country is being buffeted by the global troubles, the resource-based economy is still expected to grow 1 per cent this year, according to Namibia's central bank.

Russia
The Russian government has already invested about $11-billion to try to aid banks, and is looking at another $55-billion stimulus package to restart the economy and support the country's ailing banking system. Lenders are suffering from a fast downturn in the oil-powered economy of Russia.  

China
China's big banks have avoided troubles with subprime and other toxic assets, and may benefit as the government unveils a big stimulus package designed to keep the country's economy growing quickly. If that doesn't work, though, expect the banks to face bigger loan losses.

Japan
Japan's response to the banking bust of the 1990s was a 'What not to do' lesson. The country put off dealing with bad loans and propped up bad banks for too long. Just as the country finally started to take big steps to fix the problem, this financial crisis cropped up. So far, Japanese banks have avoided the worst of it, signalling perhaps they've learned from experience.  

Australia
Ranked fourth by the World Economic Forum for soundness of banks, Australia's system shares many attributes with Canada's. It's centralized, with a few big players that are making money. The big problem for Australia is an economic one: its banks may not be big enough to take up the slack as global lenders cut back on lending, leaving the country's borrowers in the lurch.  

Maybe government regulation is the way to go - don't you think?

canadian gal :: Global Banking - Regulator Envy.
Tags: (All Tags)
Print Friendly View Send As Email

man... (2.00 / 2)
iceland is a perfect lesson in what not to do - the question is will the rest of the world learn from their lesson?

"I spend my days and nights pondering the meaning of life, the state of the universe, and the Home Shopping Network." -- Donald Roller Wilson

and I absolutely agree with you about (2.00 / 2)
the need for strong regulations!

I am years behind and decades ahead. ~ Somebody else, I am certain


[ Parent ]
Thirded. (2.00 / 2)


John Askren - "Never get into a pissing match with a skunk."

[ Parent ]
I have had Canadian envy for years and years. (2.00 / 2)
I don't actually want to be Canadian, but really wish we were more like you in many ways. I happen to be very fond of many of the European countries social systems as well...

I am years behind and decades ahead. ~ Somebody else, I am certain


That's freaking awesome (2.00 / 2)
And from a selfish perspective, it's great to have an economically stable neighbor...who isn't undergoing a military drug lord coup.

You folks are the model citizens on the street. Unfortunately, I suppose that makes us the neighbor with the car on blocks out front.


sucks to be iceland. nt (2.00 / 2)


"The past is indestructible; sooner or later all things will return, including the plan to abolish the past" -Jorge Luis Borges

yep. (2.00 / 1)
you should check this out... wall street on the tundra - these icelanders went freaking berserk.

"I spend my days and nights pondering the meaning of life, the state of the universe, and the Home Shopping Network." -- Donald Roller Wilson

[ Parent ]
Ireland is in problems too (2.00 / 1)
There's a saying in Dublin - what's the difference between Iceland and Ireland? One letter and about six months.

We've really burnt our fingers on this one. A lot of my college year went into finance and the city. I never quite understood what they did - packaging debt, selling futures.

Now it looks like they didn't either.

This could have a big impact on London. The city here was rivalling Wall Street in recent years for volumes of trade, and the UK economy became over reliant on the financial service sector as a source of growth and employment. We don't have the depth or diversity of the US economy, the manufacturing base of Germany, and are massively over leveraged compared to Canada.

Where did it all go wrong?

Many books and papers and op-eds remain to be written about that. But I'm watching the ideology of growth and leverage, something that's dominated most my adult life starting with Reagan Thatcher, collapse before my eyes. Not to mention the personal financial impact this is having.

Interesting times, CG. Scary but interesting.

The p***artist formerly known as 'Brit'


[ Parent ]
Search




Advanced Search
Menu

Make a New Account

Username:

Password:



Forget your username or password?


Blog Roll
Angry Bear
Angry Black Lady
Balloon Juice
Black Kos
Booman Tribune
Charles P. Pierce
Crooks and Liars
Daily Kos
Five Thirty Eight
Huffington Post
Juan Cole
Maddow Blog
P.M. Carpenter
Political Wire
RumpRoast
Scholars & Rogues
Smartypants
Stonekettle Station
Talking Points Memo
The Field
Washington Monthly
Wonkette
Moose With Blogs
Atdleft
Barr
BorderJumpers
BTchakir
Canadian Gal
Charles Lemos
Cheryl Kopec
Curtis Walker
Douglas Watts
Hubie Stubert
Intrepid Liberal
ItStands
Janicket
JoeTrippi
John Allen
LibraryGrape
MichaelEvan
National Gadfly
Peter Jukes
Senate Guru
Zachary Karabell




Back to Top

Posting Guidelines  |  FAQ  |  Privacy Policy  |  Contact the Moose  |  Contact Congress
Powered by: SoapBlox