Via Global Finance magazine (free sub here) this "mid year" 2009 list of the world's safest banks:


The soundness of rating agencies rankings and the relative value of the word "safest" notwithstanding there is a curious thing about the first seven names on this list: none are "classic" banking groups in the free-market, stock exchanged sense of the word:

  • KfW is owned by the German Federal Government and its individual member states. Its modern form was created out of Marshall Plan funds and a strong social development mandate
  • La Caisse des Dépôts et Consignations is the French sovereign wealth fund dedicated to sustainable and socially beneficial development in France
  • Bank Nederlandse Gemeenten is owned by the central Netherlands Government, its municpal and provicial authorities and - in its own words - "a water board". Its goal is to minimise the cost of provision of social services
  • Landwirtschaftliche Rentenbank is controlled by the German Federal Government with a mandate to develop and promote German agriculture and its food industry
  • Rabobank, while not a public sector entity, is owned by 153 independent local cooperative banks in the Netherlands. Its roots lie in rural cooperatives and specialised lending to the food and agricultural sector - still its focus today
  • Landeskreditbank Baden-Württemberg Förderbank is a German state bank mandated to finance the economic and social development needs of Baden-Württemberg businesses and residents
  • NRW.Bank is also a German state bank (for North Rhine-Westphalia) with similar aims
Public ownership or a cooperative structure certainly do not guarantee prudence - some of the less thoughtful German public sector financial institutions (IKB, saved coincidentally enough by KfW in 2007; WestLB; and SachsenLB) demonstrated 2 summers ago that direct state guarantees, although helpful with the ratings agencies, made them astoundingly risk tolerant when it came to subprime investments.

Yet those at the top of this list have something else, it seems, differentiating them from their fully-quoted private sector brethren. While Rabobank appears to be is a separate species with the role played by its cooperative structure on its risk management perhaps being significant, the others appear to have benefited from very specific operational foci and/or smaller than average asset bases (and so smaller margins for error) with which to play.

It may also have helped that they perhaps had dedicated professionals who believed their organisations' mission statements were not produced primarily for use by the investor relations departments.

Course, the reality may not be that simple...

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3 comments

  1. Charles Butler // 4/21/2009 04:05:00 PM

    Yeah well, maybe.

    They're too small to make the radar, except for La Caixa and Caja Madrid (which is categotically not on the list), but the social welfare model that governs the cajas saved few of them from the perils risk tolerance.

    The Quebec version of the caisse got a little overexcited, too.

    Cheers

  2. RJH Adams // 4/22/2009 01:54:00 PM

    Charles,

    right - on the face of it you'd say a sovereign guarantee nails down the top rating agency ratings. It's not a balanced profit AND safety measure GF produced. But given many public sector financial entities managed to ingloriously squander that backing it is curious to me that others of the same strain managed not to - and to such a degree as to dominate these sorts of rankings.

    R

  3. Charles Butler // 4/24/2009 03:11:00 PM

    It apparently helps not to have been exposed directly to a property bubble, although that doesn't explain Belgium's near absence on the list.

    Cheers

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