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After eight years of the biggest bank bailouts, the most money printing, and the lowest interest rates of all time, you’d think all of the world’s largest banks would be safe by now.
They’re deemed “too big to fail” and given government shelter from financial hurricanes, right?
They’re the first to receive fresh cash when funny money is injected into the economy, right?
Their single biggest cost — the cost of borrowing short-term funds — virtually disappears when interest rates are cut to zero, right?
Right.
And indeed, that’s what helps explain why America’s large banks are in much better shape today than they were during the Great Debt Crisis of 2008. But …
43.6% of Big Eurozone Banks
Are Stuck in the Danger Zone
Four times yearly, our separate Weiss Ratings subsidiary issues safety grades not only on thousands of U.S. banks, S&Ls and credit unions, but also on 286 large banks in 51 different countries all over the world.
Unlike Wall Street’s Big Three rating agencies (Standard & Poor’s, Moody’s and Fitch) …
We never accept payment or favors from any institution for its ratings.
We never supress publication of our ratings at a company’s request.
We never give companies a preview of their ratings prior to publication.
And we always issue the grades whether they like it or not.
This is why it’s widely recognized that only Weiss Ratings issues all its grades on all industries with no conflicts of interest.
It helps explain why The New York Times wrote Weiss was “the first to see the dangers and say so unambiguously.”
It’s why Barron’s published a feature story dedicated to Weiss Ratings with the headline “The Leader in Identifying Vulnerable Companies.”
It’s also why the U.S. General Accounting Office (GAO), the U.S. Congress, the SEC, the FDIC and multiple state governments have recognized Weiss Ratings in similar ways.
Our Safety Ratings scale is clear: A means excellent safety. B means good. C means fair. D is weak. And E is very weak. A plus sign means the upper third of each grade range; a minus sign means the lower third.
Here’s the key: According to the GAO, which studied our ratings in depth, any institution with a Weiss Safety Rating of D+ or lower is “vulnerable.”
I call it “the danger zone.”
And never forget: All of our bank Safety Ratings are based on official data. All are firmly grounded in each institution’s capital, asset quality, earnings stability and liquidity. All come with a 37-year record of clearly warning savers and investors of virtually every future failure well in advance.
So when we say many Eurozone banks are vulnerable, we’re not kidding.
In his latest report, Weiss Ratings bank analyst Remi Lukosiunas provides the sad stats:
- Among all Eurozone banks we cover, nearly HALF (43.6% to be exact) are in the danger zone (rated D+ or lower).
- Even if you include all of the stronger Eurozone banks in the mix, the average rating for all the Eurozone banks we cover is still a wobbly C-, just one notch away from the danger zone.
- The Eurozone has four of the six largest and most vulnerable banks in the world. Only two are in other regions of the world — one in India and one in Brazil.
- Italy’s banking industry is in the worst shape of all. Among the ten large Italian banks we cover, nine are in the danger zone with D and E Only one is outside the danger zone — and just by a hair, with a C-.
- It’s no coincidence that Italy also happens to be the country with the two largest weak banks in the world:
- UniCredit with $924.5 billion in assets, rated D+, and
- Intesa Sanpaolo with $791 billion in assets, also a D+
- But in the land of banking woes, Italy is certainly not alone. Greece has two banks in the danger zone and Spain has three.
- In contrast, among major North American banks, the percentage rated D+ or lower is zero.
(Go here for Remi’s latest article. Go here to sign up for free Weiss Ratings articles and alerts.)
The happy news is that, in the global banking industry, the big bad balance sheets are mostly concentrated in Europe. So bank failure contagion is less likely today than it was in 2008.
The unhappy news is that, in the realm of government debt, cancer and addiction have penetrated every major economic power on the planet …
All major governments are in
the danger zone (except one).
Economists forever warned that the danger zone for sovereign governments is 50% or more. In other words, the most a government could safely pile up in public debt is HALF of its Gross Domestic Product (GDP).
Today, ALL major countries in the world (except China) are in that danger zone, making it increasingly difficult for governments to bail out banks in trouble.
Poland’s government debts are 54.5% of GDP.
The Netherlands’ debts are 62.3%.
Germany — 68.3%
Brazil — 69.5%
India — also 69.5%
Ireland — 75.4%
Austria — 84.6%
United Kingdom — 89.3%
Canada — 95%
France — 96%
Spain — 99%
Belgium — 105.9%!
United Sates — 106%!
Portugal — 131.6%!
Italy — 132.6%!
Greece — 179%!
Japan — 250%!
All this has far-reaching
implications for investors.
First, this hard data confirms our view that, among the economic superpowers, the United States continues to win the Miss Universe crown for the “least ugly.”
Unlike the situation in Europe, America’s big banks are mostly outside of the danger zone (for now). And compared to Japan, America’s official government debt load, although huge, is less than half as bad.
Meanwhile, U.S. financial markets are, by far, the largest and most liquid on Earth.
Second, it adds weight to our argument, which we’ve made here repeatedly, that tidal waves of flight capital from overseas will continue to flow to the relative safety of the United States.
Third, it adds urgency to our warnings of an imminent debt crisis overseas, and the importance of protecting yourself from the fallout.
Fourth, and most important, it gives you an opportunity for wealth-building like none other.
That’s why, starting the day after tomorrow, Wednesday, Oct. 18, I will present and host a three-part online symposium as a special extra for our loyal readers.
The second session will run on Thursday; and the third on Friday. Each session will begin at 2 p.m. Eastern Time and will run for 30 minutes or less.
We will give you …
- our vision for U.S. and global markets for the next few years,
- our near- and long-term strategy for protection and profit,
- the specific tactics we plan to deploy, plus
- the names and symbols of the investments we intend to use.
A presentation outline will appear continually on screen, and a full transcript will be provided. Closed captions will also be available.
Since you are a subscriber to our services in good standing, there is no cost for attending. All that’s required is your RSVP in the form of a quick sign-up on our registration page.
Good luck and God bless!
Martin
Dr. Weiss founded Weiss Research in 1971 and has dedicated his entire career to helping millions of average investors find truly safe havens and investments. He is Chairman of the Weiss Group, which includes Weiss Research and Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recession and Depression.
{ 7 comments }
While the article focuses on bank levels of problems, I was much more interested in the country levels of debt.
A much more interesting question is how do these debt levels historically? In essence, a chart, like a stock price chart for a company, but instead, one showing debt to GDP % over time. That would give us all perspective on how we are doing, where we are going and potentially fodder for communicating the appropriate level of concern to various politicians and public opinion drivers.
I really enjoy reading your educated opinion about financial news across the world. Thank you. Id like to hear your views about the vulnerability of US banks to European banks. Herbert Hoover’s account of the bank failures in 1929-1933 largely attributed US financial distress from loans given to European banks. Do we have a similar situation today? Thank you again.
The Greek sovereign debt crisis is huge but the worst of it seems to have passed..bad debts are a common feature in accounting part of systemic risk and unsystemic risk. We are currently in a prosperity, recession, depression and improvements economic cycle. Keep your eyes out for today’s financial times which states that may is pressing Merkel to end Brexit impasse. Brexit is gonna be very complex and long drawn out. Its a pity the boom in the economy can’t be as long drawn out.
Can you please tell us why China is not in the danger zone? Chinese banks have piles of debt and the data provided to the western hemisphere is either distorted or false. Thank you.
Marina, you hit the nail on the head, and the government is in the same boat so will be in no position to bail the banks out. The wealth management funds the banks sell are really a giant Ponzi scheme funding flash and trash.
It does not matter what you say, when Rothschild is ready to collapse it, it will happen, unfortunately he runs the show?
We are at the top of a massive 5th Wave. The drop is coming soon and will be horrendous.