24 Apr 2013

The 50 biggests banks : $64 trillion in assets

A few days ago, I was puzzling about how it was possible that the total amount of private sector and public sector debt was twice as large as the total money supply and whether that really meant that it would be physically impossible to ever pay off all the debt.

I thought I would try another tack. Using information from an interesting site called BankersAccuity, I downloaded information about the world's 50 biggest banks. I've compiled the numbers into the following table which gives numbers for the total assets of each bank, together with the amount of capital that each one has. It makes for interesting reading.

First, if you add all the assets together, you get a total of over $64 trillion. This is actually quite close to the number for the total money supply that I got. But given the way that the numbers are dropping, I presume that total bank assets are going to go way over that value. In fact, the distribution looks fairly exponential in form in that the bank that is 22nd in the list has half the asset value of the 1st on the list, and by the time you get to number 44, the assets have halved again. Continue like that for another couple of hundred banks and the total reaches about $90 trillion. Add to that $31 trillion in assets held by Pension funds, and $21 trillion said to be held on personal accounts in tax havens and you have a number that is quite close to the $137 trillion in total debt that I found by combining the numbers for private and public sector debt.

So, that's where I think the debt is held. Around $90 trillion is held by banks, $31 trillion by pension funds, and $21 trillion by "pirate" banks in tax havens.

The other remarkable feature of the table are the numbers that the banks provide for their capital. The ratio of assets to capital varies from 20:1 for the China Development Bank Corporation to an incredible 3705:1 for the Swiss Bank UBS. Taken together, the total assets to capital ratio is 82:1, but the average is 380:1.

I presume that these numbers give some idea about just how much money the commercial banks have been injecting into the world economy. When they create new money by making loans, they increase their assets. This happens, for example, when someone borrrows money to buy a house. The bank makes the loan and the person who borrowed the money owes them that money.

Clearly there is a big difference between these numbers and the capital requirements that are supposed to be imposed by Basel III  around 30:1.  It looks like nearly all the banks on the top 50 list could are going to have a difficult time getting enough capital to meet those requirements.

Maybe the central banks could help out. They could start by taking over the $47 trillion in public sector debt, and charging 0% interest.

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