The banking sector in the U.S. does not compare in any way to the ‘safety’ of overseas banks in regard to long term bank deposit and foreign exchange currency ratings, from Standard & Poors, Fitch, and Moody’s. The top 50 globally rated banks from the respected GFMag safety survey show some statistics that Stress Test followers may find surprising.
There are thirteen newcomers to the list; a 20% replacement ratio rate from 12 months ago. The highest ranking bank is Germany’s KFW, Singapore and Finland added major players to the list, with two of Singapore’s entrants matching Deutsche Bank and Bank of Montreal’s credit ratings. Span and Canada moved into the top ten with Banco Santander and Bank of Canada. Some casualties to the list include Citi, Bank of America, Barclays, and Royal Bank of Scotland.
The U.S. has no banks in the top 20, and just five banks in the top 50 list.
4 of the top 7 are German
9 of the top 10 are European
14 of the top 20 are European
5 of the top 20 are Australian or New Zealand
2 of the top 20 are Canadian
33 of the top 50 are European
France has as many top 50 banks as the U.S. and a far higher overall ranking with 3 of the top French banks within the top 20, and one, CDC, in at number 2 on the list. European and Australian banks dominate the overall rankings.
The five U.S. banks in the top 50 are Wells Fargo (21), US Bancorp (26), Bank of New York Mellon (34), JP Morgan Chase (45), and tied for 50th with three overseas banks is BB&T.
“Whatever the Stress Test results are they really do need to be delivered in the correct manner if a new move to safety is not to be into equities and overseas financial sectors,” TheLFB Team said. “The impact of the dollar liquidity that has been made available by the Fed in an effort to release those dollars horded by European banks may just get the revaluation of the greenback that the FOMC members desired. Dollars may get repatriated in the move out of Treasuries, and the dollar index may easily then drop, helped by the sheer weight of Usd notes and bills in circulation.”
In the fifth cycle of global business trends, the trough, it is usual to see the dollar appreciate as an evaluation of debt takes place; something that happens once every 10-15 years internationally on average, and once every 5-8 years in the U.S. As expansion takes place in the first part of the new business cycle the move to risk tolerance takes place and Treasuries and bonds are swapped for equities and commodities. By default a devaluation of the Usd happens, something that historically aides the U.S. recovery.
“The things that will help signal that the dollar moves may soon be happening include S&P futures holding 800 as support and then running a sideways channel of trade that tests and holds 875,” TheLFB Team said. “Looking for support to hold, and then testing 925 and 950 may mean that the dollar is already losing heavy ground. Monitoring the reaction to the first Treasury auction that is not over-subscribed by a rate of 3:1, something that has been the norm may reveal further equity strength, and further Usd weakness.”
The largest holders of U.S. Treasuries include China, Japan, the U.K., and the Caribbean Banking sector. In that group China and Japan dominate and the new U.S. administration may have already set in place a good reason for China to start to look for better value in both return and exposure ratios. Treasury Secretary Geithner has already accused China of currency manipulation, and pushed for aggressive changes in China’s economic policies.
That U.S. accusation was answered by those holding the largest percentage of U.S. debt and by those funding the U.S. administrations lifestyle, when Chinese Premier Wen Jiabao said “No other country can put pressure on China to appreciate or depreciate the renminbi.” he later added, “To be honest I am a little bit worried” when discussing the safety of China’s massive holdings of U.S. based assets. He asked that the U.S. concentrate a lot more on maintaining its global credit rating; something that the U.S. banking system is struggling to do it seems.