European Leaders

Author: Andrew Cunningham

Europeans dominate Global Finance’s Safest Commercial Banks ranking.

Fifteen European banks are included in Global Finance’s first ranking of the 50 safest commercial banks in the world.  Canada and the US together contribute the same amount (eight from the US and seven from Canada).

Global Finance’s ranking of the World’s Safest Commercial Banks comprises banks that are not majority-owned by a government or state agencies: A bank that is 50.1% government-owned is not eligible for inclusion. The other criteria are the same as those for the global ranking: Banks must be among the biggest 500 in the world when ranked by asset size, and they must hold ratings from at least two of the three major credit-rating agencies.

Many of the banks the Global Safest List enjoy some support from governments or government agencies, including all of the top-10-rated banks in this year’s ranking—all of whom are European. Stripping out those that have government support creates some interesting results.

None of the Chinese or Korean banks that are included in the Global 50 are eligible for inclusion in the Safest Commercial Banks listing, and no private-sector bank from those two countries scores highly enough to be included.

In contrast, four Japanese banks are included among the Safest Commercial Banks, although none scores highly enough to reach the Global Top 50 list.

Stripping out government-owned banks makes room for three US banks that do not score highly enough for inclusion in the global list: Wells Fargo (ranked 34th), State Street (ranked 39th) and Northern Trust (ranked 42nd).

Twelve of the 19 European banks that appear in the Global Safest 50 Banks are ineligible for inclusion in the Commercial rankings because of their ownership structures, but the seven that remain are joined by eight other European commercial banks that did not score highly enough for inclusion in the Global Safest list. These eight include major institutions, such as BNP Paribas, Standard Chartered and France’s Banque Fédérative du Crédit Mutuel.

The highest-rated bank in Latin America, Chile’s state-owned BancoEstado, is not eligible for inclusion in the Commercial Rankings. Neither is the highest-rated bank in the Middle East, National Bank of Abu Dhabi, which is majority-owned by Abu Dhabi government agencies.

Canada’s TD Bank Group leads the Commercial Bank listing, although the three big Singaporean banks hold the same ratings (two at AA- and one at AA+). TD Bank takes first position as a result of its larger asset size.

Six banks follow with two AA- ratings and one at AA, with Rabobank leading the pack, again owing to its larger asset size.

Three A+ ratings—generating a score of 18 points—are needed to assure inclusion among the Top 50 Commercial Banks. The four lowest-ranking banks among the top 50 each have 17 points. Four other banks scored 17 but are not included, owing to their smaller asset sizes: SABB and Al Rajhi from Saudi Arabia, Lichtenstein’s LGT Bank and Frost National Bank in the US.

In contrast to the cutoff of 18 points, a score of 20 points was needed to assure inclusion in the Global Top 50, with 19 being sufficient for banks with large asset sizes.

Despite the removal from the Commercial Banks’ list of institutions whose high ratings result from state support, many large and well-known commercial banks fail to score highly enough for inclusion in the top 50. Banks such as Deutsche Bank, JP Morgan Chase, Royal Bank of Scotland and Santander still fall short.