British banksless sound than Botswana's

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October 9, 2008

British banks rated less sound than Botswana's

Jenny Booth

Britain's banking system is less financially sound than banks in Botswana – or even Iceland – according to a survey of business opinion carried out for the World Economic Forum.

Business leaders in Britain rated UK banks a mere 44th in the world for solvency, well behind countries in Africa and Latin America including Senegal, Botswana, El Salvador - and even behind Iceland, whose three main banks have all been taken into national ownership after collapsing into financial turmoil this week.

The United States was rated 40th in the survey of executives around the world on the relative health of their national economies.

Top of the league in the executive opinion survey came banks in Canada, which were awarded a rating of 6.8 out of 7 by Canadian businesspeople. Under the scoring system, 7 is taken to represent banks that are generally healthy with sound balance sheets, and 1 is when banks are felt to be insolvent and in need of a government bailout.

Sweden, Luxembourg, Australia, Denmark and the Netherlands came just behind Canada, on 6.7. Iceland was rated 6.2. The US was rated at 6.1 and the UK 6.0, placing both about a third of the way down the table of 134 countries.

The opinion survey was carried out before recent seismic upheavals in the global financial system, including the UK's £500 billion rescue scheme for its banks, the international 0.5 per cent cut to interest rates, both announced yesterday, and the US's proposed $700 billion bank bailout, agreed last Friday.

It does not take into account the dramatic events in Reyjavik in the last week, where the three main banks - Glitnir, Landsbanki and Kaupthing - have all been taken over by the Icelandic authorities.

Algerian banks came bottom of the league table, with a rating of just 3.9. Perhaps surprisingly, Zimbabwean banks came in 122nd with 4.5, above more generally solvent and stable countries as Argentina (129th, on 4.2) and Libya (133rd, with 4.0).

China's banks came a dismal 108th with a score of 4.9, and Japan's were rated 93rd, with 5.1, by business people in their respective countries.

The executive opinions on banks was a small section of a general report, which combined opinion surveys with economic data to rank the relative global competitiveness of entire countries. In the report's overall ratings, the US came top, followed by Denmark, Sweden and Singapore.

Full story, source: The Times