With the soundness of the global banking system still the focus of many policy-makers and regulators – and the final capital standards still being debated in Basel and elsewhere – The Banker’s Top 1000 World Banks offers important insight into the global banking system’s capital-to-asset ratios (CAR).
Over the past two years, banks have continued to boost their capitalisation levels. This year’s ranking shows that total Tier 1 capital for the Top 1000 rose 10.5%, to $5433bn, easily outstripping the growth in assets. This shows that the trend towards higher CAR worldwide continues unabated. Among the 25 largest banks by Tier 1 capital, capitalisation is rising even more sharply – Tier 1 capital was up 12.1%, whereas assets grew more slowly than for the Top 1000 as a whole, by 5.9%.
Our regional breakdown of average CAR, based on aggregate figures for all the banks from each region that are in the Top 1000, reveals that most regional banking systems either meet or exceed the new minimum standard of 7%.
Some overshoot by some way. Central Asia, for example, boasts average capital levels of more than 13%; while eastern Europe has average levels above 11% and the Caribbean exceeds 10%. By this measure, both North America and Latin America both squeak through, with average levels of 7.3%.
Only two regions fall below the crucial 7% level: Asia-Pacific and western Europe. The latter, which, under The Banker’s classification, includes the eurozone and non-member countries in western Europe, in addition to Scandinavia and Turkey, falls below by some measure, with only 4.28%, ensuring the results of European stress tests will be eagerly anticipated.
However, there are arguments that this aggregate measure may distort the picture because the size weighting essentially turns it into a measure of the biggest banks’ CAR. On a simple average basis, the figures look more reassuring; for instance, it would push up western European CAR to 7.17%, and Asia-Pacific to 6.41%.
On a bank-by-bank basis, it remains the small and often specialised banks that boast the highest ratios, such as France’s Electro Banque, which holds top spot, with 88.83% CAR. When ranking banks according to the Bank for International Settlements (BIS) ratios, however, even super safe Electro Banque is knocked off its perch. Using this measure of Tier 1 and Tier 2 to risk-weighted assets, it is the US’s Bond Street Holdings, with 125.04% BIS ratio, that heads the table.
