China’s Giant Banks Top This Ranking. And That’s a Cause for Concern
The outsize growth of a country’s banks is a sign that credit expansion is faster there than in other nations.
In 1988, 9 of the 10 largest banks in the world were Japanese. Three years later the country’s financial system, along with its lenders, collapsed, sending Japan into its infamous lost decade (or three, considering the country is still struggling to escape deflation and low growth). The nine Japanese companies in the top ranks by assets 30 years ago have since consolidated into four successors. Only one turns up in this year’s ranking.
By 2007 all of the top 10 slots were filled by U.S. and European lenders. A year later the subprime mortgage meltdown hit the U.S. The sovereign debt crisis followed in Europe. Four of the 10 had to be bailed out by their respective governments. If they hadn’t been rescued, they probably wouldn’t exist today. U.S. and European economies, like Japan’s, have contended for most of the past decade with low growth.