Felix Salmon

The systemically-important 30

By Felix Salmon
November 30, 2009

The FT has the list of 30 international financial institutions which the international Financial Stability Board considers systemically important.

The first thing to jump out from the list is that just 5 of the 30 companies are American, and none of the six insurers: the likes of Mizuho, Intesa and Aviva are considered systemically important, while, say, Wells Fargo isn’t. (It’s not clear what the status of AIG is. Maybe it can’t be too big to fail if it’s already failed.)

The second thing of note is that there’s not much in the way of BRICs here, or even emerging-market institutions in general. Two of the four UK groups — Standard Chartered and HSBC — are about as close as it comes; there’s no Chinese bank on the list at all. Never mind all the chatter over Dubai: emerging markets are still very much the victims of financial meltdown, rather than the cause of it.

Finally, why is it only European insurers who make the cut? Two of them are Swiss; the others (Axa, Aegon, Allianz, and Aviva) are generally considered French, Dutch, German, and English respectively. What’s Berkshire Hathaway, chopped liver?

5 comments so far | RSS Comments RSS

Because these are the institutions which are most likely to cause global problems. The whole point of the list is to focus complicated cross-border supervision efforts where they’re needed most. Despite their size, Wells Fargo and Berkshire Hathaway are overwhelmingly domestic institutions. The same can’t be said for Mizuho or Axa, which have substantial overseas operations (indeed, for Axa, I’d be surpised if even half of their business was in France).

Posted by Ginger Yellow | Report as abusive

Ginger Yellow – good point well made

Posted by vk9141 | Report as abusive

Might be interesting to some – http://www.scribd.com/doc/23385096/FSB30 -Intrinsics

Posted by Tim Backshall | Report as abusive

The reason there are no US insurers there is the bancassurance model never took off here. If I can be more controversial though, on a solvency basis, the state-controlled regulation of solvency of insurers has been more risk averse (and sound) than the national regulation of banks.Actuaries are a plus as well; banks don’t have them. They do more stress testing of longer term scenarios, rather than what the quants did with mainly short-term VAR. The cruder models work better than the fancy ones, because markets aren’t always liquid.Insurers usually possess “table stability” rather than the “bicycle stability” that banks possess. Bicycles are stable when they are moving, but not if they stop. Tables are always stable. Most insurers would find it difficult to stop writing business, but they can typically do it without affecting solvency. Banks have a harder time with that because of their shorter funding structures and hedging needs.http://alephblog.com/2009/01/03/bi cycle-stability-versus-table-stability-i i/


“They do more stress testing of longer term scenarios, rather than what the quants did with mainly short-term VAR.”Well, they do on the insurance side of things. But insurers performed just as badly as the banks, if not worse, with their investments.

Posted by Ginger Yellow | Report as abusive

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