Insider Monkey

Top 20 Most Profitable Banks in the World

Ramish Cheema
13 min read

In This Article:

In this piece, we will take a look at the top 20 most profitable banks in the world. If you want to skip our analysis of the banking industry and the trends in the U.S. economy, you can head on over to Top 5 Most Profitable Banks in the World.

The economy is made up of money. And money is managed by banks. Therefore, banks have a central place in any economy and their health often determines the fate of millions of people in a country and billions worldwide.

One of the most striking examples of how an imbalance in the banking industry can devastate millions is the 2008 global financial crisis. This crisis was purely due to banks making risky bets on financial instruments called mortgage backed securities. As the title suggests, these securities were basically a bet on people who had taken out mortgages to make regular payments. The banks sold the potential of these payments to investors willing to take the risk, and some of them also leveraged their portfolios on these instruments. Some of these banks that did invest in the mortgage securities were also left insolvent as their market value dropped due to a housing market crash - leading to a chain reaction that threatened the existence of the U.S. economy.

After the 2008 crisis, the government sprung into action and passed a sweeping set of reforms dubbed the Dodd-Frank Wall Street Reform and Consumer Protection Act. This act increased banks' capital requirements (the money or investments they have to hold to ensure they can meet a large scale cash withdrawal), created a body to monitor predatory lending, increased SEC oversight of credit rating agencies, and other measures.

So why is this history lesson important? Well, after the 2008 financial crisis, 2023 was the most turbulent year for the U.S. banking sector. In March, three banks, Signature Bank, Silicon Valley Bank, and First Republic Bank failed in just a handful of days - shocking consumers, investors, and government officials alike. In the aftermath, debate raged about whether the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 which repealed some of Dood-Frank's changes such as increasing the asset threshold for stress tests and also removed the Volcker Rule for smaller banks, was also responsible for the banking crisis. Some believe that it is, while others argue that even if Silicon Valley Bank was stress tested in 2022, it would have nevertheless passed since the Fed's requirements for this test were unreflective of the yields and losses that eventually caused its demise.

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