World’s safest banks 2020: commercial banks


Global finance names this year’s 50 safest commercial banks.

Commercial banks have focused for years on transforming their business models to take advantage of digital, but the Covid-19 pandemic has accelerated this process. Executives recognize the need for greater operational efficiency as customer expectations rise beyond mobile apps and online payment capabilities. As their customers isolate themselves and, in many cases, switch their employees to telecommuting, they must embrace technological advancements to better enable them to target customers and markets.

The pandemic and the resulting pressures on the industry have led to significant changes in the ranking of the safest commercial banks this year. Four Australian banks: ANZ Banking Group, Commonwealth Bank of Australia, National Australia Bank and Westpac suffered A + downgrades from AA- to Fitch Ratings due to concerns about bank profitability and asset quality.

Many of the institutions that have earned a place in Global Finance’s ranking of the safest commercial banks have strong capital ratios, and a strong funding and liquidity profile will help them withstand potentially lasting declines in profitability. All are feeling the pain of the economic contraction precipitated by the pandemic; However, it remains to be seen which ones emerge the strongest. With revenue growth proving elusive, commercial banks are in close competition to differentiate themselves and gain operational efficiency. The pace of technology spending continues to accelerate.

A new era

The last few years have seen a marked increase in new rules for bankers regarding money laundering and other ethical and legal issues. This year, Swedbank has fallen sharply to 34th place in the rankings as the discovery of gaps in its compliance with anti-money laundering laws prompted the three agencies to downgrade it. HSBC France and the National Bank of Kuwait also both fell following downgrades by Standard & Poor’s.

In a new era of banking, consumers and business customers are benefiting as mobile banking apps and lending platforms give them faster and easier access to credit. As the largest and most diverse banks continue to refine their current offerings, they are rushing to develop additional capabilities that make better use of data analytics.

Artificial intelligence (AI) is essential to the most complex types of data analysis demanded by banks and is at the heart of the industry’s technological transformation. AI enables commercial banks to efficiently explore data for new product development, customer acquisition and retention, risk management, fraud protection, cybersecurity and compliance, and detection of breach. fight against money laundering (AML). The Royal Bank of Canada, the highest ranked commercial bank this year, whose research division Borealis AI has deployed to its clients an AI-based electronic trading platform using an algorithm that promises improve the execution of equity transactions.

In a positive development for payments, the European Commission (EC) adopted a retail payments strategy in September, which the EC says aims to reduce market fragmentation, “creating the conditions for developing instant payments and EU-wide payment solutions. profitable and accessible to individuals and businesses across Europe. With change, new entities are rising to the ranks of the safest. Natixis and Crédit Industriel et Commercial are new entrants this year.

The commercial banking sector is under pressure on profitability, squeezing margins and increasing credit costs as its loan portfolio deteriorates in vulnerable sectors. New exposures will require an initial reserve for loan loss expense, in accordance with the current Financial Accounting Standards Board expected credit loss model and the IFRS 9 accounting treatment of International Financial Reporting Standards, rather than an estimate of the expected credit loss. loss incurred at the time a loan originates.

Commercial banks that are majority state-owned or benefit from the sponsorship of their governments or regional bodies are excluded from the Global Finance ranking. The institutions included here may operate in the same markets as state-sponsored competitors, but do not enjoy government support.

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