Visualizing Why The Future Of Europe's Financial System Hangs By A Thread
This highly informative (and very disturbing) graphic prepared originally in 2009 by the Guardian, makes it all too clear just why Europe is so concerned about its banking sector, and if it isn't, why it most certainly should be. While the top 5 banks in the US have roughly $7 trillion in assets (all of which are largely undercapitalized, as the little black circles show a bank's market cap, thus demonstrating the gaping hole between assets and equity, and yes, these are dated as they indicate the mkt caps as of early 2009, but that is largely irrelevant for this exercise), just the top five banks in France alone have nearly $1 trillion more in assets than all of the US banks (and are even more undercapitalized). Add to this the UK, Germany, Spain, Italy, Belgium, and the Netherlands, all of which are intricately interconnected with one bank's assets representing another bank's liabilities, in the world's biggest circle jerk, and you can see why quite literally the fate of the world depends on Europe containing the fallout from the ongoing financial crisis. Imagine for a second that these tens, if not hundreds, of trillions in assets in European banking assets are marked to market, even as the liabilities are completely fixed, thus crushing trillions in equity value, and you can see just how precarious the financial stability of the entire world is. One little falling domino forcing a MTM scramble across the banking sector will end Europe's financial system. The only amusing consequence of this doomsday hypothesis is visualizing the powerless and decentralized consortium of the ECB, BOE and SNB attempting to stop an avalanche of a hundred trillion in busted bank assets. One can see why Jean Claude Trichet is the world's most nervous human being.
PS - for clarification, the underlying market cap data is dated, but the held assets have not changed much since the chart's creation.
above chart in pdf format