Global Finance has recently named the Top 10 safest banks of the world using different statistical factors. And with a sweep, European banks got all the ranks amidst the economic strife that Europe is experiencing. But what exactly are the qualities that put these banks to the top?
Except Netherlands, 9 of the 10 safest banks named are state-owned. And with the triple-A reputation of European countries when it comes to transparency of their financial obligations, these banks really set the highest standard in banking.
Topping the list is KfW of Germany, followed by other state-owned banks from strong economies that are not affected by the downgrades of sovereign credit-rating. KfW is in a comparative advantage because the government guarantees all of the bank obligations and it gets triple star from three trusted rating companies.
In other continents, China and Chile also made a cut with 2 coming from each countries in the Top 50 list. China Development Bank and Banco de Chile represent the emerging market banks given their respective countries’ recent successes in the international market.
Based on the Top 50 list, 7 came from Canada, just above by margins from countries like Singapore, Australia and United States. This prowess of Canada is highly manifested by the high standards of living in the country which also belongs in the highest in terms of education and employment.
The Global Ranking of Safest Banks, which was introduced way back in 1992, has been the most credible reference by companies and investors all over the world. It does individual analysis of bank performance per region most especially on times of turbulence. The Top 50 banks are held under scrutiny for their performances most especially when their countries suffer from the global economic fatigue. Making it in the list would be a very big milestone most especially because investors look at the creditworthiness profile of their counterpart banks.
Sound and sustainable practices are being practiced by banks who wanted to increase their ranks in the list. By getting more satisfaction and trust ratings coming from the customers, banks are able to get more investor counterparts and more people come to deposit and save their money in such banks. With the current conditions, people are just more critical as to where they can place their hard-earned money at. Safety is an issue that encompasses different transactions all over the world.
Standard and Poor’s, Moody’s, Fitch and Dominion Bond Rating Service are some of the top international rating companies trusted by corporate and financial institutions all over the world. The size of the banking system is roughly considered by the value of assets held by each country’s banks. And all of them consider bank stability as a very crucial factor in getting the highs in the rating.
The search for the safest banks has surged after the Cyprus bail-out, when a couple of governments already refused to give guarantees that are beyond the official limit. But whether investors go beyond the limit or not, such protection is already a comparative advantage that only semi-government institutions can provide. So it’s a question of how much of a protection can banks offer and if it’s the safest from the array of options that are available to the investors.
But more so, it’s also a question of whether investors would go to a state-owned bank or a private bank. Because of the state resource backing up guarantees, it normalizes the capability of private banks to flood benefits to its customers. After all, it’s not just the money’s growth that is at stake. It’s also about the security of the investment that greatly matters when one goes into banking.
Going back to KfW that consistently topped the list, it operates more than just a traditional bank. It has served as a government-driven lending machine that has been created to spur Post-War infrastructure spending.
But KfW’s success story is not an all-time high. With the problems that the global market is facing, it’s very difficult to put the words “safe” and “bank” altogether. Yet amidst the woes, at least we know the viable options to go.