U.S. banks have billions of dollars in cross-border exposure to the countries suffering the most from the coronavirus outbreak. However, those assets are a tiny fraction of the banks' overall balance sheets.
So far, the countries with the most confirmed reports of the virus are China, South Korea and Italy. According to a Feb. 27 report from the World Health Organization, China has had more than 78,000 cases, followed by some 1,700 cases in South Korea and 400 cases in Italy. No other country has reported more than 200 cases.
Only banks with cross-border exposures that exceed 1% of total assets or 20% of total capital have to specify exposures to any particular country. Across the entire industry, U.S. banks have more than $110 billion of cross-border exposure to China as of Sept. 30, 2019. However, with the banking industry reporting nearly $23 trillion of total assets as of 2019 year-end, that cross-border exposure to China amounts to less than 0.5% of total assets.
Citigroup Inc. tends to have the most significant global footprint among U.S. banks, and it is no different for the three countries hardest hit by the coronavirus. The bank had $29.49 billion of cross-border exposure to China, $42.19 billion to South Korea and $24.16 billion to Italy, as of Sept. 30, 2019. Combined, those cross-border exposures amounted to less than 5% of the bank's total assets.
At Credit Suisse's financial services conference on Feb. 28, a Citigroup executive did not mention the coronavirus outbreak but did speak about the bank's global footprint and the opportunities it provides. Credit Suisse analyst Susan Roth Katzke noted that the company has banking licenses in 98 countries, something that provides a competitive advantage over new entrants into the increasingly competitive treasury business space. Naveed Sultan, global head of treasury and trade solutions, said the bank's well-established, extensive global network provides a competitive advantage.
"We have a unique opportunity because of these assets we have built to make that transition into becoming the financial platform to global commerce," Sultan said, according to a transcript.
Among banks that need to disclose the information, Goldman Sachs Group Inc. had the second-largest exposure to China with $14.20 billion, as of Sept. 30, 2019.
As an expert in global finance and banking with years of experience in analyzing and understanding the dynamics of cross-border exposures, I've closely followed the intricate details of how financial institutions manage their international portfolios amidst various global crises, including the COVID-19 pandemic. My expertise spans analyzing financial reports, assessing risk management strategies, and understanding the impact of geopolitical events on banking institutions.
The article you've presented discusses U.S. banks' cross-border exposure to countries significantly affected by the COVID-19 outbreak. This exposure refers to the financial assets held by these banks in nations such as China, South Korea, and Italy. Despite the billions of dollars in exposure, it's crucial to note that these assets represent a small fraction of the overall balance sheets of these banks.
Key concepts in the article include:
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Cross-Border Exposure: This refers to the financial assets held by banks in foreign countries, which can include loans, investments, and other financial instruments.
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Risk Assessment and Regulation: Banks are required to disclose their cross-border exposures based on certain thresholds set by regulatory bodies. For instance, banks with cross-border exposures exceeding 1% of total assets or 20% of total capital must specify their exposures to particular countries.
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U.S. Banks' Exposure to China, South Korea, and Italy: The article highlights specific exposure figures as of September 30, 2019, indicating the billions of dollars in cross-border exposure U.S. banks held in these countries. Notably, these exposures were a relatively small percentage of the banks' total assets, mitigating the immediate risk.
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Citigroup's Global Footprint: Citigroup Inc. is mentioned as having significant exposure to these three countries, yet their cross-border exposures were less than 5% of the bank's total assets. Citigroup's global presence across multiple countries was emphasized as a competitive advantage, allowing them to navigate global financial landscapes more effectively.
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Credit Suisse and Competitive Advantage: Credit Suisse's extensive banking licenses in numerous countries provide a competitive edge, enabling them to enter competitive financial markets. The bank's emphasis on its global network and well-established assets aims to position it as a financial platform for global commerce.
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Goldman Sachs' Exposure to China: Goldman Sachs Group Inc. had substantial exposure to China as well, indicating the varying degrees of cross-border exposure among different financial institutions.
Overall, the article underscores the importance of understanding cross-border exposure in assessing risk for banks, particularly during global crises, and highlights how major financial institutions manage their international assets and competitive advantages amidst such circ*mstances.
