European banks still exposed according to Basel metric

Analysis of latest annual data provided by globally systemically important banks to the Basel Committee on Banking Supervision suggests that UK, French and Swiss banks continue to pose a risk as measured by their size compared to the GDP of the country in which they are based.

Data and news provider SNL Financial said that analysis of the figures pointed to Swiss banks in aggregate representing total exposure of some $2.3trn, which is equal to about 325% of the country’s 2014 GDP. The ratio for French banks was about 287%, while for UK banks it was about 277%.

By comparison, although the US exposure sum through its globally systemically important banks was far larger, the ratio to GDP was far lower, at about 88%.

There is debate over the relative risk associated with these figures and comparisons, however, notes SNL because of the far larger size of the non bank financial sector in the US. The measure of non bank financial institution assets to GDP comes out at some 297% for the US.

European banks also tend to report far higher proportions of cross border assets than US banks, which could skew the final exposure to GDP ratios, which will affect the scores that the Basel Committee applies to individual banks for purposes of determining how large their capital buffers should be.



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