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Presenting Total Bank Assets As A Percentage Of Host Countries' GDP

Tyler Durden's picture





 

With the threat of sovereign default and contagion now pervasive within the Eurozone periphery, it is relevant to quantify the relative exposure of various banking centers' assets as a percentage of host countries' total GDP. The reason for this is that in Europe for many countries a sovereign default would not have as great an impact, as a risk-flaring contagion impacting these countries' primary financial entities, whose assets account in some cases for multiples of host GDP. For example in Switzerland, the assets of the top two banks, UBS and Credit Suisse, alone account for nearly 600% of the country's GDP. And while Switzerland is relatively isolated from the budget and deficit crises in the PIIGS and STUPIDs, other countries such as Italy, Belgium and ultimately France, Germany and the UK, are much more exposed.

  • Belgium - Dexia: 180%of GDP
  • France - BNP Paribas, Credit Agricole, SocGen: 237% of GDP
  • Germany - Deutsche Bank: 84%
  • Italy - Unicredit, Intesa Sanpaolo: 101%
  • Netherlands - Fortis: 155%
  • Spain - Banco Santander: 92%
  • UK - RBS, Barclays, HSBC: 337%

Compare that to the top 5 banks in the US (a list which excludes hedge funds such as Goldman Sachs).

  • US - JP Morgan, Citigroup, Bank of America, Wells Fargo and Fannie: just 56% of GDP.

The question which pundits should be focusing on is once the Greek crisis flares up and takes down several peripheral non-hosted banks, just what the interplay of a "falling domino" scenario will be not only on neighboring European countries, but also on the holdings of their domestic banks. Because it is inevitable that the same kind of bank run witness in Greece, will become a pervasive phenomenon and impact Portugal, Spain, Italy, etc, which would be the precursor to a global bank run.

The chart below demonstrates graphically the ratio between a given bank's asset and the GDP of its host country. Unfortunately for Europe, there is a dramatic concentration of bank assets precisely in some of the most precarious regions. Which is why Germany may have kicked the can down the road for at least a month, but the issue will come back with a vengeance for the simple reason we have noted from the start of this crisis: only Bernanke has a money printer. Everyone else actually has to produce "stuff", sell it and collect taxes if they want to fill catastrophic budget deficits. And the latter, as we have seen, is something the developed world has been horrible at doing over the past decade, courtesy of the Goldman-facilitated innovation explosion.

 


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Wed, 02/17/2010 - 17:08 | Link to Comment carbonmutant
carbonmutant's picture

 Generally speaking it's a good idea to remove "financial tumors" before they metastasize.

Wed, 02/17/2010 - 17:16 | Link to Comment Problem Is
Problem Is's picture

"... top 5 banks in the US (a list which excludes hedge funds such as Goldman Sachs)"

Novice Question: Why exclude a "hedge fund" like the Goldmanites, if they are classified as a deposit bank and can sidle up to the Fed discount window?

Wed, 02/17/2010 - 17:20 | Link to Comment Anonymous
Wed, 02/17/2010 - 17:46 | Link to Comment VegasBD
VegasBD's picture

by a waiver

Wed, 02/17/2010 - 17:19 | Link to Comment trav7777
trav7777's picture

"Assets"?  Are these marked to myth?

Like to know exactly what assets BNP or UBS are holding.  I can see Switz banks having a lot of bribe money, oil for food money, related drug trafficking skims, and other kickbacks, graft, and related payola due to the secrecy laws.  But, would like to know what the hell these days qualifies as an asset.

If you let me mark to model, I have assets orders of magnitude larger than world GDP right here in my colon.

Wed, 02/17/2010 - 17:39 | Link to Comment Anonymous
Wed, 02/17/2010 - 17:24 | Link to Comment Stuart
Stuart's picture

it misses the derivative exposure too.    How many trillions does JPM account for just themselves... 

Wed, 02/17/2010 - 17:27 | Link to Comment Gunther
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+1

Wed, 02/17/2010 - 18:00 | Link to Comment DavosSherman
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http://www.occ.treas.gov/ftp/release/2009-34a.pdf

JPM 87 trillion total derivatives 1.7 trillion assets, BOA 38 trillion to 1.4 trillion and Citi 31 trillion to 1.2 trillion.

 

 

 

Thu, 02/18/2010 - 06:18 | Link to Comment Anonymous
Wed, 02/17/2010 - 19:18 | Link to Comment RiskFreeT
RiskFreeT's picture

 

Great Frontline piece last night, the people running the hidden markets, or shall we dare say "ponzi" pulled all the political might they could to silence poor Brooksley Born who was just doing her job (something unheard of in DC).

Wed, 02/17/2010 - 20:05 | Link to Comment Going Down
Thu, 02/18/2010 - 03:37 | Link to Comment Rick64
Rick64's picture

Has been available for a while. Great Show.

Wed, 02/17/2010 - 17:26 | Link to Comment Ragnarok
Ragnarok's picture

Looking at this tells me we should have let the chips fall in 2008.  We would have been the strongest one when the apocalypse ended.

Wed, 02/17/2010 - 18:43 | Link to Comment masterinchancery
masterinchancery's picture

Excellent observation! Didn't the EU have a lot of influence on the AIG bailout?

Wed, 02/17/2010 - 19:02 | Link to Comment Anonymous
Wed, 02/17/2010 - 17:30 | Link to Comment Careless Whisper
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GoldmanSachs is America's Most Innovative Choreographer

Wed, 02/17/2010 - 17:32 | Link to Comment faustian bargain
faustian bargain's picture

Bank assets versus national GDPs. That's kinda like a rainbow unicorn versus a sparkle fairy.

Wed, 02/17/2010 - 19:46 | Link to Comment fuu
fuu's picture

wow, bravo

Thu, 02/18/2010 - 00:24 | Link to Comment Tethys
Tethys's picture

ok that was LOL   +1

Wed, 02/17/2010 - 17:35 | Link to Comment SWRichmond
SWRichmond's picture

Missing: Glitnir, Landsbanki, Kaupthung.

If they're private companies, who cares how much assets they have?  If people are stupid enough to get "jammed for the commish", why do I care?  Why does bank = national interest, and therefore bailout required? 

Wed, 02/17/2010 - 18:55 | Link to Comment Anonymous
Wed, 02/17/2010 - 17:35 | Link to Comment bob resurrected
bob resurrected's picture
National Data on Banking Sector

2007

2008

Number and Size of Credit Institutions Number

870

867

Total Assets (mEUR)

899,542

1,069,364

Total Assets per GDP

332.13%

378.94%

http://www.fma.gv.at/cms/op/EN/einzel.html?channel=CH0468

Don't forget Austria.

Wed, 02/17/2010 - 17:36 | Link to Comment girl money
girl money's picture

looks like my pet rabbit visited the right side of the graph, sorry 'bout that.

how many billions of future earnings did we just flush trying to rescue the pellets?

 

Wed, 02/17/2010 - 17:40 | Link to Comment Leo Kolivakis
Leo Kolivakis's picture

Can you expand to include Canadian banks too?

Wed, 02/17/2010 - 17:49 | Link to Comment Bruce Krasting
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Great graph. We are so F-ed if this starts to get unwound. Which it will.

Wed, 02/17/2010 - 17:50 | Link to Comment Yossarian
Yossarian's picture

I can't get my mind around the $Trillions in interest rate swaps outstanding.  Obviously for every party betting (hedging) higher rates there is one betting (hedging) lower-for-longer but I suspect the two parties on many trades are somehow both claiming an accounting gain (based on their models, of course).  But what happens when rates rise will be interesting.  I'm wondering if there is an AIG out there selling dud insurance throughout the world against higher rates.  I guess we won't know until it happens but I wouldn't want to bet on the global financial structure being a well oiled  machine- after all, with so many $Trillions of gross interest rate bets (hedges), small mistakes can do massive damage to global balance sheets. 

Wed, 02/17/2010 - 19:57 | Link to Comment Ripped Chunk
Ripped Chunk's picture

This aired again on Frontline last night.

http://www.pbs.org/wgbh/pages/frontline/warning/view/?utm_campaign=viewpage&utm_medium=grid&utm_source=grid

We don't need any derivatives regulation. That's the kind of thing that will cause a major problem in the financial markets. The market will sort it out.

It got sorted out alright.

Wed, 02/17/2010 - 17:57 | Link to Comment Anonymous
Wed, 02/17/2010 - 17:58 | Link to Comment Whizbang
Whizbang's picture

If I were in the position to do so, I would be short greek cds right now as fast as I could. According to the economist, the banks with the most exposure to PIIGS and STUPIIDS exposure are Germany, France, and Switzerland. There is a nearly 100% chance that greece will be bailed out. There is no way that the swiss are letting their banks lose a several hundred billion dollars on sovereign exposure.

Wed, 02/17/2010 - 18:12 | Link to Comment lizzy36
lizzy36's picture

What criteria was used to name Fannie Mae a top 5 bank in the U.S?

Wed, 02/17/2010 - 18:14 | Link to Comment Oso
Oso's picture

title should read, "Presenting Total Bank Assets As A Percentage Of HOSTAGE Countries' GDP"

Wed, 02/17/2010 - 18:46 | Link to Comment Anonymous
Wed, 02/17/2010 - 19:09 | Link to Comment Anonymous
Wed, 02/17/2010 - 21:23 | Link to Comment RiskFreeT
RiskFreeT's picture

One by one, the alleged "props" of the bull market thesis get taken out, yet the market marches on, with nary a real drop.

Weak volume rally is bearish

Dow 5000 or 15000???

Thu, 03/04/2010 - 13:31 | Link to Comment Anonymous
Wed, 02/17/2010 - 19:43 | Link to Comment dan22
dan22's picture

The Coming Euro Collapse- How a Greek default could cause a run on the European banking system

If Greece was to default on its debt the banks of the country will collapse immediately. At that event their will be no way for the government to save the depositors of the banks since they will not be able to print or borrow money. The implications to the credit markets for such an event will be enormous since no bank will want to lend to any bank in Portugal, Italy, Ireland, Spain and maybe others. Since this will be the first time since the crisis began in 2007 that depositors lost money it will cause a panic and it is very likely that  there  will be an immediate run on the banks of Portugal, Italy, Spain and Ireland at a time when the countries themselves are unable to raise capital Source: Euro Collapse
Wed, 02/17/2010 - 19:43 | Link to Comment three chord sloth
three chord sloth's picture

Since Greece is the topic du jour, could they be added to the chart? Thanks!

Wed, 02/17/2010 - 20:11 | Link to Comment svendthrift
svendthrift's picture

So the risk is that the derivative links have created a situation whereby one bank failing will bring them all down. And they're all in excess of 100% GDP over there. Ergo, they're literally on the edge of total economic collapse.

Do I have it right?

Wed, 02/17/2010 - 21:22 | Link to Comment fotokemist
fotokemist's picture

Yup.

Wed, 02/17/2010 - 21:14 | Link to Comment Anonymous
Wed, 02/17/2010 - 23:20 | Link to Comment merehuman
merehuman's picture

they must have drunk the cool aid.We did since 911. Why no american bank runs?

Good coolaid! Television, killer of imagination and asset of the vampire sqid.

Wed, 02/17/2010 - 23:44 | Link to Comment JohnG
JohnG's picture

Takes a bit for the sheeple to wake up, and it happens gradually with electronic money in this day and age.

Wed, 02/17/2010 - 23:23 | Link to Comment merehuman
merehuman's picture

Squid. Caught the mistake too late. Wondering why americans dont care about their spelling. I see tons of mistakes. Makes me think we are lazy, stupid or under educated. 

Wed, 02/17/2010 - 23:40 | Link to Comment Anonymous
Thu, 02/18/2010 - 02:21 | Link to Comment Reggie Middleton
Reggie Middleton's picture

Wow! This stuff looks awfully familiar...


I will attempt to illustrate the "Overbanked" argument and its ramifications for the mid-tier sovereign nations in detail below and over a series of additional posts.

Sovereign Risk Alpha: The Banks Are Bigger Than Many of the Sovereigns

This is just a sampling of individual banks whose assets dwarf the GDP of the nations in which they're domiciled. To make matters even worse, leverage is rampant in Europe, even after the debacle which we are trying to get through has shown the risks of such an approach. A sudden deleveraging can wreak havoc upon these economies. Keep in mind that on an aggregate basis, these banks are even more of a force to be reckoned with. I have identified Greek banks with adjusted leverage of nearly 90x whose assets are nearly 30% of the Greek GDP, and that is without factoring the inevitable run on the bank that they are probably experiencing. Throw in the hidden NPAs that I cannot discern from my desk in NY, and you have a bank that has problems, levered into a country that has even more problems.

This is from http://boombustblog.com/Reggie-Middleton/1310-The-Coming-Pan-European-Debt-Crisis.html where I made the risks quite clear:


The fact that governments worldwide have made the (generally unwise) attempt to bailout their big banks by transferring bad debts and liabilities from the private sector and bank investors to the public sector and taxpayers doesn't mean that the problem has been solved or even ameliorated. As a matter of fact, I believe the problem has now been amplified, for now we have effective increased the implicit leverage in the already excessively leveraged banking problems as well as removed the natural firewalls that may have been in place by having the problems in individual financial institution versus sitting on government balance sheets, able to affect all without the need of the "domino effect" that was feared from the Lehman collapse.

This leverage stems from the fact that most European sovereign nations are considerably "overbanked". The levered assets of the banks in many Euro-sovereign nations easily outstrip those nations' GDP's. So when the nations' banks get in trouble from bad banking practices (and a very large swath have), the nations themselves not only are helpless in attempting to truly save the banks (and instead only institute a bait and switch wherein private default risk/insolvency potential is swapped for public manifestations of the same), but are put at risk themselves for the bank is actually more of a sovereign entity than the sovereign is - at least from an economic footprint perspective. This is what happened in Iceland. If one were to take an empirical look at other nations in Europe, Iceland and Greece are merely the tip of the iceberg. I have warned about this over a year ago regarding Spain and the Spanish banks (see The Spanish Inquisition is About to Begin...), and now the chickens are coming home to roost.

It's the non-performing assets that tell the true story. When there is a run on the bank, the street knows who not to lend to. That is why no one touched Bear and Lehman in 2008! You can clearly see which nation's banks will get ostracized when the choco pudding hits the fan blades.

 

I have harped on this topic in my previous Pan-European Soverign Debt Crisis post, but let me drive it home again. Greece is merely a test drive by traders and those who are truly concerned about the debt overhang from the global bailout. Yes, it has the highest debt to GDP ratio, but it is closely followed by much larger nations with much worse, and much more immediate debt and NPA issues.

As initially illustrated in my last post on this topic, when pondering the sovereign debt status of Italy, Spain and Ireland, keep in mind how much of their GDP is bogged down by NPAs in their banking systems - and this is what is reported, knowing full well that the reporting is at best, lagged in terms of non-performing assets... 

 

from http://boombustblog.com/Reggie-Middleton/1311-What-Country-is-Next-in-the-Coming-Pan-European-Sovereign-Debt-Crisis.html

 

When comparing these sovereigns using metrics that encompass more than the usual suspects, you get a clearer picture. The bank bailouts were expensive, arguably too expensive. It may have been better to let them fail in the market and nationalize them. Notice how the nations with the highest NPAs are doing the worst. In addition, one should remain cognizant that the "extend and pretend" game has allowed hundreds of billions of "phantom" NPAs to roam free in each of these countries' GDPs unrecorded. I believe there may be some surprises left in quite a few of the German banks. We will probably see if I'm right over the next few quarters. See German Recovery Stalls Unexpectedly in Fourth Quarter:German gross domestic product showed no growth in the final quarter of last year, official data showed on Friday, leaving Europe's largest economy on a weak footing going into 2010.

All one really has to to is follow the banking losses. They are deeply concealed in the Spanish banks, but are now coming home to roost (From Bloomberg: BBVA Fourth-Quarter Profit Plunges 94% to $44 Million on Asset Writedowns). 

 

from http://boombustblog.com/Reggie-Middleton/1313-The-Pan-European-Sovereign-Debt-Crisis-If-I-Were-to-Short-Any-Country-What-Country-Would-That-Be.html last week.

The next one will be on CEE nations which will really be an eye opener.

Mon, 04/19/2010 - 08:33 | Link to Comment Tom123456
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Mon, 02/14/2011 - 07:51 | Link to Comment Partizannka
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Generally speaking it's a good idea to remove "financial tumors" before they metastasize. colocation

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