The Banker’s Top 1000 ranking of global banks is 50 years old in July. Over that period the banking industry has grown exponentially, with large banks becoming ever more dominant, writes Brian Caplen.
Since 1970 the global economy has increased in size by four or five times. Over the same period, the asset base of the largest bank has increased 160 times. Back in 1970 Bank of America led The Banker's Top World Banks ranking (then based on assets) with $25bn. Today’s frontrunner, China’s ICBC, has assets of more than $4000bn.
On top of this, today’s big banks account for an even larger slice of total ranking's profits, assets and capital than their predecessors, a trend that has increased since the financial crisis. In 2006, for example, the top 10 banks in the Top 1000 accounted for 20% of total capital, which is already a hefty share. But by 2019 that percentage had increased to 25%, making banking even more top heavy and with inevitable questions to be addressed about ‘too big to fail’.
Meanwhile the international banks are complaining that many of their businesses are commoditised with thin margins and are only profitable at scale. In Europe there are too many banks and cross-border mergers need to happen to make the industry efficient.
This conundrum – of efficiency pushing banks in the direction of scale whereas regulators are concerned about competition and systemic issues – is set to be with us for a long time, but maybe not forever. For what 50 years of The Banker’s Top 1000 World Banks ranking shows is that the industry is always in the midst of change and that today’s leaders may not be in pole position tomorrow and tomorrow’s leaders will not look like the banks of yesteryear.
For a more detailed assessment of the past 50 years see The Banker’s March cover story.
Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen
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