10 years on, world’s biggest banks keep getting bigger

A decade after the financial crisis, the U.S. continues to debate whether financial reforms put an end to ’too big to fail’ — the concept that banking institutions are so large and integral to the financial system that the government could not afford to let them go under.

Yet, while the world’s biggest banks are much better capitalised than they were a decade ago, they are also significantly bigger.

In the wake of the near-collapse of large parts of the financial system, international regulators boosted capital standards and established a list of global systemically important banks, or G-SIBs, which are subject to even more stringent regulations. The worlds largest banks have raised more than $1.5 trillion in capital, giving them high-quality buffers as much as 10x higher than a decade earlier, according to the Financial Stability Board.

But data from S&P Global Market Intelligence shows that the 30 G-SIBs are also almost all significantly bigger than they were in 2006, the year before the subprime mortgage market began to buckle.

In the U.S., New York-based JPMorgan Chase & Co. has nearly doubled in size since the end of 2006, totaling $2.56 trillion at Sept. 30. Bank of America Corp.’s asset size has increased by more than 50%, while at beleaguered Wells Fargo & Co., assets are nearing $2 trillion, more than 300% larger than pre-crisis. Much of the growth at these banks is a direct result of crisis-era mergers orchestrated in conjunction with banking regulators to help shore up the financial system. These banks’ sizes are measured under GAAP and would appear even larger if measured under International Financial Reporting Standards used outside the U.S.

In Europe, London-based HSBC Holdings Plc had $2.49 trillion in assets at midyear 2017. This is up significantly from $1.86 trillion at year-end 2006. A few have shrunk, like Royal Bank of Scotland Group Plc, which grew rapidly into the world’s fifth-largest bank on the eve of the crisis with $3.66 trillion in assets but is now a milder, retail-focused shadow of its former self, and majority-owned by the U.K. government.

The growth is most pronounced in Asia. China’s four G-SIBs have all more than tripled their asset sizes over the last 10 years. The biggest, Industrial & Commercial Bank of China Ltd., had $3.76 trillion in assets at midyear 2017.