History Repeats

Andrea Fiano's letter to you, the reader.

VOL. 35  NO. 10

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Editors should not repeat themselves, but our 30th annual presentation on the World’s Safest Banks,  confirms a surprising stability through a second year of crisis. Despite the prolonged multi-wave pandemic and consequent economic contraction, the big ratings agencies were not, generally speaking, driven to significantly revise their assessments of individual banks or sovereign issuers.

One pillar of bank stability is strong government backing. After years of low interest rates, quantitative easing and other stimulus, banks benefited further from measures to soften the pandemic’s economic impact , and from their role as conduit between central banks, corporates and citizens.

But another factor may be that such ratings are at best a lagging indicator, and at worst may miss some fundamental weakness or risk. So far, even analysts who expected a delayed impact have been fooled. Still, the past is no guarantee of the future. A surge in interest rates or inflation, or even a sudden geopolitical crisis, could change the fundamental picture in short order—and thereby upend the ratings.

Andrea Fiano | Editor