Financial System Structures Seen from Outside the US Nicolas Vron - - PowerPoint PPT Presentation

▶

Sep 20, 2022 361 likes •521 views

Financial System Structures Seen from Outside the US Nicolas Vron Senior Fellow, Bruegel (Brussels) Visiting Fellow, Peterson Institute for International Economics (Washington) The Brookings Institution Washington DC, December 4, 2012 1 An

SLIDE 1

Financial System Structures Seen from Outside the US

Nicolas Véron Senior Fellow, Bruegel (Brussels) Visiting Fellow, Peterson Institute for International Economics (Washington) The Brookings Institution Washington DC, December 4, 2012

1

SLIDE 2

An I ncreasingly Multipolar W orld…

Sample: banks in FT Global 500 rankings. Source: FT, author’s calculations

2

0% 10% 20% 30% 40% 50% 60% 12/2000 12/2001 12/2002 12/2003 12/2004 12/2005 12/2006 12/2007 12/2008 12/2009 12/2010 12/2011

Aggregate Market Value

f World's Largest Listed Banks (%)

Asian Banks US Banks European Banks Rest of World

SLIDE 3

Non-US Financial System s Are More Bank- based…

Typically 7 0 -7 5 % bank-based ( in Europe) vs 2 5 -3 0 % in

the US

– Even more so in many large emerging economies

Com paratively underdeveloped channels

– Equity financing (public and private) – Specialized credit institutions: leasing, consumer credit, etc. – Mid-sized corporate bond issuance (high-yield) – Loan securitization – Mezzanine funds and other credit funds

3

SLIDE 4

…Non-US Banks Are Com paratively Larger…

World’s largest banks by assets Top 3 banks’ assets to GDP

Source: The Banker Database, Bank for International Settlements

4

Bank Country 2011 Assets $m Deutsche Bank Germany 2,800,133 MUFG Japan 2,664,171 HSBC UK 2,555,579 BNP Paribas France 2,542,880 ICBC China 2,456,295 Credit Agricole France 2,431,932 Barclays UK 2,417,369 RBS UK 2,329,767 JP Morgan Chase US 2,265,792 Bank of America US 2,136,578 Mizuho Japan 2,012,909 CCB China 1,949,219 Bank of China China 1,877,520 Citigroup US 1,873,878 AgBank China 1,853,319 SMFG Japan 1,741,213 Santander Spain 1,619,349 Societe Generale France 1,528,577 UBS Switzerland 1,508,303 Lloyds Banking Group UK 1,500,561 BPCE France 1,472,969 Wells Fargo US 1,313,867 ING Bank Netherlands 1,243,651

200 400 600 France Germany Italy Netherlands Spain Sweden UK Japan US 1990 2006 2009

SLIDE 5

…And Often Unlisted…

Unlisted European banks in Global Top 1 0 0 by assets

– BPCE (# 21), Rabobank (# 26), Credit Mutuel (# 32), DZ Bank (# 47), LBBW (# 51), Bayern LB (# 58), Nationwide (# 74) – None in the US

Listed banks represent less than 4 0 % of Germ an

banking sector

Variations in governance, transparency

– e.g. German Landesbanken, Spanish savings banks

5

SLIDE 6

Banks Have Diverse I nternationalization Patterns…

Share of total revenue outside home country, 2010

Sample: 50 largest banks by assets; source: annual reports

6

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Mitsubishi UFJ (JP) Mizuho (JP) Sumitomo Mitsui (JP) Bank of China (CN) Resona Holdings (JP) Bank of Communications (CN) ICBC (CN) China Construction Bank (CN) Norinchukin Bank (JP) Agricultural Bank of China (CN) ASIA (Weighted Avg) Citigroup (US) Goldman Sachs (US) Morgan Stanley (US) JP Morgan Chase (US) Bank of America (US) Wells Fargo (US)

N. AMERICA (Weighted Avg)

Standard Chartered (UK) Nordea (SE) HSBC (UK) Credit Suisse (CH) Deutsche Bank (DE) ING Bank (NL) Santander (ES) BNP Paribas (FR) UniCredit (IT) BBVA (ES) Dexia (BE) UBS (CH) Barclays (UK) Societe Generale (FR) Credit Agricole (FR) Danske Bank (DK) Royal Bank of Scotland (UK) Rabobank (NL) Commerzbank (DE) Intesa Sanpaolo (IT) DZ BANK (DE) ABN AMRO (NL) Credit Mutuel (FR) BPCE (FR) Lloyds Banking Group (UK) LBBW (DE) EUROPE (Weighted Avg) Scotiabank (CA) Royal Bank of Canada (CA) Toronto-Dominion Bank (CA) ANZ (AU) National Australia Bank (AU) Commonwealth Bank (AU) Westpac (AU) Banco do Brasil (BR) ANZ-CA (Weighted Avg)

SLIDE 7

…Leading to Different National Exposures to I nternational Risks…

Domestic banks’ foreign assets relative to GDP

Source: BIS locational banking statistics

7 0% 50% 100% 150% 200% 250% France Germany Italy Netherlands Spain UK Japan US 1996 2001 2006 2011

SLIDE 8

Outside the US, Leading I nvestm ent Banks Feel More “Foreign”…

Bloomberg Equity Underwriter League Tables, H1 2012

8

Global US EMEA Asia-Pac 1 JP Morgan Citi Deutsche Bank UBS 2 Morgan Stanley Morgan Stanley Goldman Sachs Morgan Stanley 3 Citi JP Morgan JP Morgan JP Morgan 4 BofA Merrill Lynch BofA Merrill Lynch Credit Suisse Citi 5 Goldman Sachs Barclays BofA Merrill Lynch BofA Merrill Lynch 6 Deutsche Bank Goldman Sachs UBS Goldman Sachs 7 Credit Suisse Credit Suisse Morgan Stanley Deutsche Bank 8 UBS Deutsche Bank Societe Generale Nomura 9 Barclays UBS Citi CITIC 10 Nomura Wells Fargo BNP Paribas CICC

SLIDE 9

…And So Do Other Key Market Participants…

Nationality of Global Leader, Big 5/ 4 Audit Networks

Source: public reports, author’s research

9 1989-1997 L. Weinbach US 89-99 M. Cook US 87-91 R. Goerdeler DE 91-93 J. Butler US 94-01 P. Laskawy US 93-95 H. Havermann DE 94-98 (PW) J. Schiro US 95-97 J. Madonna US 94-98 (C&L) N. Moore US 1997-2000 R. Grafton US 97-99 C. Sharman UK 2001-2002 J. Berardino US 99-03 J. Copeland US 99-02 S. Butler US 98-02 J. Schiro US 2002-2003 A. Cardoso FR 03-07 W. Parrett US 01-13 J. Turley US 02-07 M. Rake UK 02-09 S. DiPiazza US 07-11 J. Quigley US 07-11 T. Flynn US 09-

D. Nally

US 11-

B. Salzberg US 13-
M. Weinberger US 11-
M. Andrew

AU Andersen Deloitte E&Y KPMG PwC

SLIDE 10

…And Also Com m ercial Banks, At Least I n Som e Sm aller Countries…

Assets of foreign-owned banks as % of total domestic banking assets. Source: Bankscope

1 0

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Austria Belgium Czech Rep. Denmark France Germany Greece Ireland Italy Netherlands Poland Romania Spain Sweden UK Japan US 2005 2008 2011

SLIDE 11

I n Europe, Special Resolution Regim es Are Often Nonexistent or Untested…

UK – Banking Act 2009
DE – Restructuring Act 2010
FR – Under discussion
IT – Consolidated Law on Finance 1998 (‘‘Draghi Law’’)
ES – Decree-Law on Bank Restructuring and Credit Institution Equity

Reinforcement 2009 (FROB), modified 2011

NL – Under discussion
IE – Central Bank and Credit Institutions (Resolution) Act 2011
BE – Financial Crisis Law 2010
DK – Danish Financial Stability Act 2008
AT – n.a.
SE – Government Support to Credit Institutions Act 2008

N.B. Countries ranked by decreasing size of banking assets (ECB data)

1 1

SLIDE 12

…and “TBTF” Can Be Really “NBATFNMHS”* …

Definition of failure
US experience since 2 0 0 8

– Bear Stearns ($400bn), Fannie Mae ($880bn), Freddie Mac ($790bn), AIG ($1trn)… – but also Lehman ($691bn), WaMu ($330bn), CIT ($80bn), MF Global ($40bn)…

EU experience since 2 0 0 7 …

– Starting from IKB (€50bn) in late July 2007… – Exceptions DSB Bank (€8bn), Amagerbanken (€4bn), Bradford & Bingley (£52bn – but losses only on sub debt)

…unless the sovereign is itself unable to cope

– Iceland 2008, Ireland 2010, Spain 2012 – Changes ahead

* No Bank Allowed To Fail, No Matter How Small

1 2

SLIDE 13

Som e Policy I m plications

Cross-border aspects less central in US

– Vs Europe, smaller countries

US far ahead in special resolution regim es

– Role of FSB / Basel Committee (FSB key attributes) – European “Banking Union”

Regulation of bank structure

– Vickers in UK context – Next steps unclear (including in US) – No one-size-fits-all approach?

1 3

SLIDE 14

Risk of Global Fragm entation?

1 4

1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Cross-Border Capital Flows as % of Global GDP

Source: Lane/ Milesi-Ferretti Database, estimate on 2011

SLIDE 15

Thank You For Your Attention

Nicolas Véron + 32 473 815 372 (Europe) / + 1 202 550 0614 (U.S.) n.veron@bruegel.org / nveron@piie.com Bruegel: www.bruegel.org Peterson Institute: www.piie.com