Singaporean & Canadian Banks Dominate List Of World’s Strongest Banks

Singapore’s Oversea-Chinese Banking Group (OCBC) has once again been named as the world’s strongest bank by Bloomberg Markets magazine, with two other Singaporean banks included in the top ten, while six Canadian banks made the list.

Bloomberg compiled the information through compiling a list of 78 banks that had total assets of more than $100 billion as of mid-March this year.

Singapore’s Oversea-Chinese Banking Group (OCBC) has once again been named as the world’s strongest bank by Bloomberg Markets magazine, with two other Singaporean banks included in the top ten, while six Canadian banks made the list.

Bloomberg compiled the information through compiling a list of 78 banks that had total assets of more than $100 billion as of mid-March this year.

The banks’ Tier 1 capital ratio, which is the ratio of a bank’s core equity capital to its risk-weighted assets, was then used to calculate 40 percent of a bank’s score, while the ratio of nonperforming assets to total assets and the ratio of reserves for loan losses to nonperforming assets had a 20 percent weight-age each, with the ratio of deposits to funding accounting for 15 percent and the efficiency ratio 5 percent.

In order to more accurately determine a bank’s strength, any bank that reported a loss for their 2011 net income was excluded from the list. Banks that hadn’t reported 2011 year-end data by March 31 were also not included.

Once the calculations were done, OCBC managed to retain its crown as the world’s strongest bank for the second year in a row, while BOC Hong Kong Holding came in second with CIBC from Canada third.

[quote]“Singapore’s economy has performed quite stably and quite well, and for the Singaporean banks, we have real economic activities to finance,” said OCBC’s CEO Samuel Tsien, who credited the bank’s strength to its risk management practices.[/quote]

Canada, who had four banks in the top ten – Toronto-Dominion Bank (4^th), National Bank of Canada (5^th) and Royal Bank of Canada (6^th) – also credited strong regulations and internal risk management as the reason for their success. As far back as January 1999, the Office of the Superintendent of Financial Institutions Canada (OFSI) had sent a letter to Canadian banks telling them to set aside at least 10 percent of total capital as a cushion for losses.

“I do not think it was popular at the time,” said Julie Dickson, OSFI’s superintendent.

“That’s where having a supervisor with a pretty clear mandate allows you to take those unpopular decisions,” she added.

[quote]But “when the crisis erupted, we realized we had stuck to a fairly basic rule, which was that the bulk of Tier 1 capital had to be in equity,” Dickson said. “That turned out to be very, very important.”[/quote]

Since then, many of Canada’s banks have chosen to exceed OFSI’s requirements, which are even higher than the internationally accepted capital guidelines of Basel I.

“Having conservative capital standards in Canada going into the downturn clearly was a competitive advantage,” said Toronto-Dominion Bank CEO Edmund Clark.

“We and our Canadian competitors are only able to do that because we have some flexibility as a result of our strength,” added Gerald McCaughey, CEO of Canadian Imperial Bank of Commerce.

[quote]“Over the longer term, this should actually help to maintain the strength of the Canadian banking system and its competitiveness.”[/quote]

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Only three U.S. banks managed to make it to the top 20 – JPMorgan Chase (13^th), PNC Financial Services Group (17^th) and BB&T Corp (20^th). The other Singaporean banks that made the top 10 are United Overseas Bank and DBS Group Holdings. Four European banks were also included, with two coming from Sweden and one each from the U.K. and Switzerland.