Wednesday, December 8, 2010

Too Big to Fail, Too Big to Jail: Bank Assets as a Percentage of National GDP

The Iceland example doesn't seem to have resulted in much scaling back.
The really troublesome country is Switzerland. Firstly because it doesn't have a European Union backstop. Secondly because so many of the bank loans are to Eastern Europe and even worse are denominated in Swiss francs. Imagine getting your salary in a depreciating currency like the Hungarian forint and having to pay your mortgage to UBS in francs which have appreciated 40%. You'd be looking foreclosure square in the eye.

From The Atlantic's story "What Does It Look Like to Leave the Euro?":
The Economist has an excellent piece this week outlining just how difficult it would be to leave the euro.  Bank runs, capital controls, angry voters, and where, exactly do you get currency for people to use?...  
...Bank assets as a percentage of GDP
Luxembourg 2,461
Ireland 872
Switzerland 723
Denmark 477
Iceland 458
Netherlands 432
United Kingdom 389
Belgium 380
Sweden 340
France 338
Austria 299
Spain 251
Germany 246
Finland 205
Australia 205
Portugal 188
Canada 157
Italy 151
Greece 141
(For comparison, total banking assets in the U.S. are equal to approximately 82 percent of GDP.)