World’s Safest Banks 2017 | A Retrospective

Global Finance’s 2007 ranking of the World’s Safest Banks contained the household names of global banking: Citigroup at 11th, Royal Bank of Scotland at 12th and HBOS at 25th, to name a few.

How things have changed!

Only 18 of the banks in the 2007 World’s Safest Banks ranking made this year’s list. Seven have fallen out of the Safest 50 but remain in the safest 100, while 17 would not even be included among the safest 100 banks in the world. (Another eight banks from the 2007 list are no longer included because they have been taken over by other banks—HBOS, which was acquired by Lloyds, is an example).

Australian and Canadian banks have been the most resilient. The four Australian banks that featured in 2007 all have a place in this year’s list, as do the four Canadian banks from 2007. DBS and United Overseas Bank, both from Singapore, have moved from near the bottom of the Global 50 in 2007 to near the top today. They have also been joined by the other big Singaporean bank, Oversea-Chinese Banking Corporation (OCBC), which was not among the 2007 top 50.

Banks that benefit from some form of government or regional support have generally retained their places. These banks now dominate the Global rankings, taking the top nine places; whereas in 2007, banks such as Rabobank, UBS and Lloyds sat among them, with exceptionally high ratings.

France’s Caisse des Dépôts et Consignations, which is sponsored by the French government, was ranked as the strongest bank in 2007 and still places highly—ninth in this year’s list. Landwirtschafltliche Rentenbank was third in 2007 and is third this year.

It is extraordinary to see that seven commercial banks held a triple-A rating in 2007, in each case from Moody’s: Rabobank, UBS, Lloyds, Wells Fargo, Royal Bank of Scotland, Royal Bank of Canada and Toronto-Dominion Bank. Moody’s had Aa1 ratings on a further 26 commercial banks in 2007, including Dexia and Wachovia, neither of which still exists as an independent bank.

In 2017, five commercial banks have Aa1 ratings, and no commercial bank has an Aaa rating. Again, Moody’s is the most optimistic agency—all of those Aa1 ratings are assigned by Moody’s. The highest rating awarded by Fitch and S&P to commercial banks is AA, one notch below.

Although it is not visible in the ranking from 2007, a comparison of ratings in 2006 and 2007 would show that the rating agencies upgraded many of the banks over the course of the year, showing extraordinary confidence in their earnings and strength, just months before the collapse of the global financial system.

Of course, the rating agencies could justify their position by saying that in most cases failing banks were bailed out by their governments or taken over by stronger institutions, with the result that bondholders were protected.

Rabobank was ranked the fourth-safest bank in 2007, with two AAA and one AA+ ratings. It has now fallen to 24th in the Global list and is only 10th in the Commercial Banks list. In contrast, Toronto-Dominion Bank ranked 27th in 2007, but rises to 19th this year.

Singapore’s DBS was 40th in 2007 but placed 11th in this year’s Global list and was the second on our Safest Commercial Bank list. DZ Bank, the safest commercial bank this year, was not included in the 2007 rankings; nor was KfW, which has occupied the top slot on the World’s Safest Bank list for six years running.