US banks don’t fare well in world’s safest bank survey. Low ranking another argument for shoring up ISDA program.
The world rankings of the safest banks are out and few US banks made the top 50. This is by no means a huge surprise but given the emphasis on ISDAs in wake of the financial crisis, it’s good to know where a bank stands and, perhaps, how much more starch a collateral support agreement (CSA) should have.
Global Finance magazine today published its 19th annual list of the world’s safest banks. Several US banks made the top 50 worldwide, including BNY Mellon (30), JPMorgan Chase (40), Wells Fargo (43) and US Bancorp (48). In North America, BNY Mellon makes the top five, with Canadian banks taking six of the top 10 spots (and the top four).
Global Finance said banks that “cleaned up their balance sheets and strengthened their capital positions” continued as the biggest gainers. But it appears that many US bank balance sheets still hold sizeable amounts of non-performing loans and need to work those off before rising to the top. The magazine said banks were ranked via a comparison of the long-term credit ratings from using ratings from Moody’s, Standard & Poor’s and Fitch as well as taking into account total assets of the largest banks.
Vigilant corporate treasurers have had ISDAs and CSAs on their radar screens for some time, but the Global Finance ranking is a reminder that robust ISDAs are in order. And despite the potential impact on working capital, those on the fence about putting CSAs in place with their major trading counterparties may consider the peace-of-mind provided by appropriate exchange of collateral. While Dodd-Frank doesn’t yet appear to have any impact on ISDAs already in place between counterparties – with or without CSAs – the rules making now in progress may prove otherwise so it pays to stay informed.