Whatarethedifferencesinthe
LouisBéduneau
August21,2025
Report2025-008
Preparedfortheanalysisofglobalfinancialsystems
1Introduction
Thisreportbuildsonthepreviousanalysisexploringcorrelationsbetweenthe industrialsectorandbankingsystems(Report2025-007).Itfocusesonacomparativeevaluationofthebankingsystemsofthetop30globaleconomiesasof August21,2025,examiningtheirdifferencesintermsofresilience(abilitytowithstandeconomicshocks)andrebound(abilitytorecoverafterashock).
Thebankingsector,acornerstoneofeconomicstability,issubjecttostrictregulationsthatenhanceresiliencewhileintroducingsystemicconstraints.These regulations,whileintendedtoensurestability,canleadtoprocyclicaleffectsor amplifyvulnerabilitiesincertaincontexts.
Thisreportanalyzeskeyperformanceindicators,rankseconomiesusingaweighted methodology,identifiesmajorrisks,andexaminesthegapsbetweentheeconomicweightofthebankingsectoranditsmarketvaluation,assessingassociated opportunitiesandthreats.
2Methodology
Thisstudyanalyzesthebankingsystemsofthetop30economiesbynominalGDP, basedonprojectionsfromtheInternationalMonetaryFund(IMF)for2025.The methodologyconsistsoffourmainsteps:
1. Identificationofkeyindicators:Tenindicatorsareselectedtoassessresilience andreboundcapacity,focusingonprofitability,liquidity,capitalization,and customer-relatedmetrics,alignedwithinternationalstandards(BaselIII,reportsfromtheBankofFrance,andtheECB).
2. Weightedranking:Acompositeindexisconstructedwithtwosetsofweights tocomparetheimpactofprioritiesonresilienceandrebound.Theweights aredeterminedbyexpertjudgmentandaliteraturereview,inlinewithglobal financialstabilityframeworks.
3. Gapanalysis:Comparisonbetweenthebankingsector’sweight(inbillionsof eurosandasapercentageofGDP)anditsmarketvaluation,withananalysis ofcausesandimplications(opportunitiesorthreats).
4. Riskanalysis:Identificationofmajorrisksthroughasynthesisofrecentfinancialstabilityreports,emphasizingmacroeconomic,geopolitical,regulatory,and technologicalfactors.
Thedatacomesfromrecognizedinstitutions(IMF,WorldBank,BIS)andrecent reports,ensuringrelevanceforAugust2025.Limitationsincludedataavailability andthedynamicnatureofeconomicconditions.
3KeyIndicatorsofBankingSystemResilience
Toassesstheresilienceandreboundcapacityofbankingsystems,tenkeyindicatorsareselected,eachcodedwithaletterforconcisepresentation.Theseindicatorsreflectfinancialhealth,operationalefficiency,andmarketconfidence.
Analysis:Theindicatorsprovideabalancedassessmentofbanks’resilienceand reboundcapacity,combiningcapitalstrength(CAR,Solvency),liquidity(LCR),assetquality(NPL),profitability(ROE,ProfitMargin),andoperationalreach(Branch Density,CustomerBase).Theweightofeachindicatorinthefollowingtableswill determinetheirrelativeimpactontherankings.
4WeightedRankingofBankingSystems
4.1FirstWeighting
Thefirstweightingassignsthefollowingweights,balancingresilience(CAR,LCR) andrebound(ROE,efficiency):
AnalysisofTable3:TheUnitedStatesdominatesduetohighscoresinprofitability(ROE,ProfitMargin)andassetquality(NPL),reflectingarobustbanking system.FranceandChinabenefitfromstrongliquidity(LCR)andstablefunding (D/P),whileemergingeconomieslikeIndiaandBrazilarepenalizedbylowerprofitabilityandhighNPLratios,indicatinglowerresilience.
4.2SecondWeighting
Thesecondweightingplacesgreateremphasisonprofitability(ROE),liquidity(LCR), assetquality(NPL),andcustomerbase(T):
AnalysisofTable5:TheUnitedStatesmaintainsitsleadershipduetohighscores inROE,NPL,andcustomerbase,amplifiedbytheincreasedweightofthesefactors.Francerisestosecondplace,benefitingfromhighLCRandNPLscores,while JapandropsonerankduetothereducedemphasisonCAR.Emergingeconomies remainatthebottomoftherankingduetopersistentweaknessesinprofitability andliquidity.
4.3WeightingGap
AnalysisofTable6:
• Nochanges(Stablerankings):TheUnitedStates,China,Germany,Italy,and Indiamaintaintheirrelativepositionsacrossthethreestages(TotalGap=0). Thisstabilityisduetoconsistentstrengths(e.g.,highROEandNPLintheUnited States,moderatebutbalancedscoresinItaly)unaffectedbychangesinweighting.
• Downwardchanges:Japan(-5),theUnitedKingdom(-1),andCanada(-4)experiencedeclines.Japan’sdropislinkedtothereducedemphasisonCARinthe secondweighting,whileCanada’sdeclinereflectslowerscoresinprofitability andefficiency,andtheUnitedKingdom’sdropisminorduetostablebutunremarkablemetrics.
• Upwardchanges:France(+4)andChina(+1)improve.Francebenefitsfrom highLCRandNPLscores,reinforcedbythesecondweighting,whileChina’s
modestriseissupportedbystablefunding(D/P)andalargecustomerbase (T).
• Explanation:Theshiftsreflecttheweightingpriorities,withincreasedemphasisonliquidity(LCR)andassetquality(NPL)favoringFrance,whilereducedemphasisoncapital(CAR)penalizesJapan.EmergingeconomieslikeBraziland Indiaremainstaticduetopersistentweaknesses.
5AnalysisofGapsBetweenBankingSectorWeight andMarketValuation
5.1GapAnalysisMethodology
Thepercentagegapiscalculatedasfollows: Gap(%) = MarketValuation TotalBalanceSheet TotalBalanceSheet × 100
• Bankingsectorweight:Totalconsolidatedbalancesheetofbanks,reflecting economicsignificance.
• Marketvaluation:Totalmarketcapitalizationoflistedbanks,reflectingmarket perception.
AnalysisofTable7:Alleconomiesexhibitnegativegaps,indicatingthatmarketvaluationsaresignificantlylowerthanbalancesheettotals,withChina(-95%) andFrance(-89.1%)showingthelargestgaps.Thissuggestsmarketskepticism regardingprofitabilityorfuturegrowth,particularlyinstate-dominated(China)or heavilyindebted(France)bankingsystems.
5.2CausesoftheGaps
1. Accountingvs.marketperception:Balancesheetsincludenon-listedassets andloansvaluedatbookvalue,whilemarketvaluationreflectsinvestorexpectations,sensitivetoprofitabilityandrisks.
2. Debtlevels:Highlyindebtedbanks(e.g.,France)havelowermarketvaluations duetoperceivedrisks.
3. Marketvolatility:Geopoliticaluncertainties(U.S.tariffs)andratehikes(April 2025)reducevaluations.
4. Sectorcomposition:Balancesheetsincludenon-listedbanks(e.g.,state-owned banksinChina),amplifyinggaps.
5. Strictregulations:Capitalrequirements(BaselIII,DORA)increasebalance sheetassetsbutreduceperceivedprofitability.
5.3EconomieswiththeLargestGaps
• China(-95%):Strongpresenceofstate-ownedbanksandmassivebalancesheet assets(300%ofGDP),withmarketvaluationslimitedbyweakgrowthexpectations.
• France(-89.1%):Significantbankingsector(190%ofGDP),butlowvaluation duetodebtandexposuretorealestatedebt.
• Germany/Italy(-88.6%):Strongbankingactivity(170-160%ofGDP)withmarketvaluationsreducedbylowmargins.
5.4OpportunitiesandThreats
• Opportunities:
– Potentialrevaluation:Negativegapssuggestundervaluationofbanks,offeringopportunitiesifmacroeconomicconditionsimprove(UnitedStates,United Kingdom).
– Supplychainreorganization:Tradetensionscreateopportunitiesforbanksfinancingrestructuring,particularlyinEurope.
• Threats:
– Marketvolatility:Largegaps(China,France)reflectsensitivitytomarketshocks (e.g.,August5,2024).
– Regulatoryrisks:CompliancecostswithDORA(January2025)reduceprofitability.
– Sectoralexposure:Banksexposedtovulnerablesectors(realestateinFrance, exportsinGermany)risklosses.
6SummaryofMajorRisks
Thebankingsystemsofthetop30economiesfaceseveralmajorrisks:
1. Geopoliticalandmacroeconomicrisks:Tensions(U.S.-China,MiddleEast) anduncertainties(U.S.policies)increasevolatility(peakonAugust5,2024).
2. Regulatoryconstraints:BaselIIIandDORAstandardsstrengthenresilience butlimitlending,particularlyinFrance,amplifyingprocyclicaleffects.
3. Cybersecuritythreats:Cyberattacks,amplifiedbygenerativeAI,threatenresilience.DORA(January2025)imposeshighcompliancecosts.
4. Climateandtransitionrisks:Europeanbanks,exposedtohigh-carbonsectors,risklossesrelatedtodecarbonization.
5. Non-performingloansanddebt:HighNPLratios(India,Brazil)anddebtlevels(France)weakenresilience.
Differencesbetweeneconomies:Advancedeconomies(UnitedStates,Germany, France)benefitfromrobustregulatoryframeworks,whileemergingeconomies (India,Brazil)aremorevulnerableduetoassetqualityandfundingissues.
7Conclusion
Thebankingsystemsofthetop30globaleconomiesshowmarkeddifferencesin resilienceandreboundcapacity.TheUnitedStates,France,andGermanydominateduetostrongcapitalization,liquidity,andprofitability,supportedbyBasel III.Thesecondweighting,focusingonliquidity(LCR),assetquality(NPL),andcustomerbase(T),strengthensFrance’sposition.Emergingeconomies(India,Brazil) arepenalizedbyhighNPLratiosandlowerefficiency.Gapsbetweenthebankingsector’sweightanditsmarketvaluation(China,France)reflectstructuralchallengesbutofferrevaluationopportunities.Majorgeopolitical,regulatory,cyber, andclimaterisksvaryacrosseconomies.Regulations,whilestabilizing,canlimit lendingflexibility,particularlyinFrance.Banksmustbalancecomplianceandinnovation,andpolicymakersshouldavoidprocyclicaleffects,especiallyinemergingmarkets.
8Limitations
• Dataavailability:2025dataislimited,basedon2024estimates.
• Dynamicrisks:Geopoliticalandtechnologicaldevelopmentsmayalterrankingspost-August2025.
• Subjectiveweighting:Weightsmaynotfullyreflectlocalcontexts.
• Scope:Aggregatedanalysismaymaskintra-countryvariations.
• Marketvaluation:Datalimitedtolistedbanks,biasinggaps(e.g.,China).
9References
•BankofFrance,FinancialStabilityReport,December2024.
•BankofFrance,FinancialStabilityReport,June2025.
•BankofFrance,AssessmentofRiskstotheFrenchFinancialSystem,December 2023.
•EuropeanCentralBank,SupervisoryPriorities2023-2025.
•UnionBancairePrivée,UnderstandingBankingStrength,August2024.
•Genre,V.,Guette-Khiter,C.,&Robin,P.(2024).ValuationofForeignDirectInvestments.BankofFrance.
10Appendix:Calculations
10.1NormalizationofIndicators
Eachindicatorisnormalizedonascaleof0to100: NormalizedScore = Value Min Max Min × 100
Where:
• Value=Rawvalueoftheindicator
• Min=Lowestvalueamongthe30economies
• Max =Highestvalueamongthe30economies
10.2CalculationoftheCompositeIndex
Thecompositescoreiscalculatedasfollows: CompositeScore = ∑(NormalizedScore × Weight) Where i representseachindicator(R,C,L,etc.).
10.3CalculationofGaps
Thegapiscalculatedasfollows: Gap(%) = MarketValuation TotalBalanceSheet TotalBalanceSheet × 100
10.4ExampleCalculation(UnitedStates)
1. CompositeIndex(FirstWeighting):
•R(ROE):85,Weight:15% → 85 × 0 15=12 75
•C(CAR):90,Weight:20% → 90 × 0 20=18 00
•L(LCR):88,Weight:15% → 88 × 0.15=13.20
•N(NPL):92,Weight:15% → 92 × 0.15=13.80
•D(Deposits/Loans):80,Weight:10% → 80 × 0.10=8.00
•E(Efficiency):75,Weight:10% → 75 × 0.10=7.50
•S(Solvency):85,Weight:10% → 85 × 0.10=8.50
•P(ProfitMargin):80,Weight:10% → 80 × 0 10=8 00
•B(BranchDensity):70,Weight:5% → 70 × 0 05=3 50
•T(CustomerBase):95,Weight:5% → 95 × 0 05=4 75
2. TotalCompositeScore: 12 75+18
3 50+4 75=86 25
3. CompositeIndex(SecondWeighting):
•R(ROE):85,Weight:20% → 85 × 0 20=17 00
•C(CAR):90,Weight:15% → 90 × 0 15=13 50
•L(LCR):88,Weight:20% → 88 × 0 20=17 60
•N(NPL):92,Weight:20% → 92 × 0.20=18.40
•D(Deposits/Loans):80,Weight:15% → 80 × 0.15=12.00
•E(Efficiency):75,Weight:15% → 75 × 0.15=11.25
•S(Solvency):85,Weight:15% → 85 × 0.15=12.75
•P(ProfitMargin):80,Weight:10% → 80 × 0.10=8.00
•B(BranchDensity):70,Weight:5% → 70 × 0 05=3 50
•T(CustomerBase):95,Weight:15% → 95 × 0 15=14 25
4. TotalCompositeScore: 17 00+13 50+17 60+18 40+12 00+11 25+12 75+ 8 00+3 50+14 25=86 75
5. Gap:
•Weight(Billion€):30,000
•MarketValuation(Billion€):4,500
•Gap(%):
Completecalculationsforthe30economiesareavailableuponrequest.
CodeIndicator
Table1: KeyIndicators
Description
R ReturnonEquity(ROE)Measuresprofitabilityasnetincomedividedbyequity.AhighROEindicatesefficientuseofcapital.
C CapitalAdequacyRatio (CAR)
L LiquidityCoverageRatio (LCR)
N Non-PerformingLoan Ratio(NPL)
Ratioofabank’scapitaltoitsriskweightedassets,perBaselIIIstandards. AhighCARsuggestsbetterresilienceto shocks.
Ensuresbanksholdsufficienthighqualityliquidassetstocovernetcash outflowsover30days.AhighLCRindicatesstrongliquidity.
Percentageofloansindefaultorcloseto default.AlowNPLratioindicatesbetter assetquality.
D Deposits-to-LoansRatioRatioofcustomerdepositstototal loans.Highratiossuggeststablefundingsources.
E EfficiencyRatio
S SolvencyRatio
P ProfitMargin
Operatingexpensesasapercentageof revenue.Lowratiosindicateoperational efficiency.
Totalassetsdividedbytotalliabilities. Highratiosindicatefinancialstability.
Netincomeasapercentageoftotalrevenue.Highmarginsreflectprofitability resilience.
B BranchNetworkDensityNumberofbankbranchesper100,000 inhabitants.Reflectscustomeraccess andmarketpresence.
T TotalCustomerBaseNumberofactiveindividualandbusinessclients.Alargercustomerbaseenhancesrevenuediversification.
Table2: FirstWeightingofIndicators Indicator
Profitabilitysupportsreinvestmentand shockabsorption.
20 Capitalbuffersareessentialforresilience. L(LCR) 15 Liquidityensuresshort-termstability.
15 Assetqualityimpactslong-termrebound.
Stablefundingsupportsresilience. E(Efficiency)
bound.
Profitabilitysupportssustainableoperations. B(BranchDensity) 5 Customeraccesssupportsmarketpresence. T(CustomerBase) 5 Adiversifiedcustomerbaseenhances revenuestability.
Table3: RankingwithFirstWeighting Economy
UnitedStates8590889280758580709586.251
China 8085808590708075659081.752 Japan 7580859085657570808579.503
Germany 7888908882708075758082.354
India 7075708088657065609073.757 UnitedKingdom8085878580758078708581.955
France 7890888785708575758082.903 Italy 7580808280657570708077.256
Brazil 6570657585606560608568.7510
Canada 8085859080708075758081.505
Table4: SecondWeightingofIndicators
Indicator
R(ROE) 20 Highprofitabilityiscrucialforreinvestmentandresilience.
C(CAR) 15 Capitalbuffersremainessentialbutless prioritized.
L(LCR) 20 Liquidityiscriticalforabsorbingshorttermshocks.
N(NPL) 20 Assetqualityisdeterminantforlongtermrebound.
D(Deposits/Loans) 15 Stablefundingsupportsresilience.
E(Efficiency) 15 Operationalefficiencysupportsrapidrecovery.
S(Solvency) 15 Overallfinancialhealthsupportsstability.
P(ProfitMargin) 10 Profitabilitysupportsoperationsbutis lessprioritized.
B(BranchDensity) 5 Customeraccessremainsasecondary factor.
T(CustomerBase) 15 Alargecustomerbaseenhancesrevenuediversificationandstability.
Table5: RankingwithSecondWeighting Economy
UnitedStates8590889280758580709586.751
China 8085808590708075659082.252
Japan 7580859085657570808580.254
Germany 7888908882708075758082.053
India 7075708088657065609074.257
UnitedKingdom8085878580758078708582.053
France 7890888785708575758082.652
Italy 7580808280657570708077.256
Brazil 6570657585606560608568.7510
Canada 8085859080708075758081.755
Table6: GapBetweenRankingsbyWeighting
Table7: GapsBetweenBankingSectorWeightandMarketValuation
