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Which Banks Are the World’s Safest?

Thursday, 16 Aug 2012 | 10:05 AM ET

Despite Europe's intractable sovereign debt(explain this)crisis and the weak economy, European banks claimed the Top 10 places in Global Finance magazine's ranking of the world's safest banks. It's the second year in a row that European banks have occupied the Top 10.

But there's a reason for Europe's sweep: With the exception of the Netherland’s Rabobank Group at number 10, the other nine banks are state-owned and enjoy explicit backing of their triple-A rated governments.

Bank Vault Door
James Porter | Brand X Pictures | Getty Images
Bank Vault Door

In the top spot is Germany’s KfW. KfW is owned by the Federal Republic of Germany and the federal states. Unlike Germany’s private sector banks, the government guarantees all KfW’s bank obligations and the bank holds triple-A ratings from the three ratings agencies. (Read More: Fitch Ratings Affirms Germany’s ‘AAA’ Rating.)

While the stronger European economies, including Germany, the Netherlands, France, and Sweden, are well represented on the list, no Spanish or Italian banks ranked among the top 50 this year. After a 10th place ranking last year, Banco Santander dropped out of the Top 50 altogether. Sovereign credit-rating downgrades have had negative knock-on effects for the Italian and Spanish banks.

Emerging market banks, by contrast, are on the upswing as their credit ratings march higher. China has two banks on the list — China Development Bank and Agricultural Development Bank of China, while Chile also registered two entrants — BancoEstado and Banco de Chile. In the Middle East, Kuwait, Qatar, Saudi Arabia, and the UAE each had a bank on the list. (Read More:China Banks' Bad Loans Steady, Capital Adequacy Up.)

Basing its rankings on long-term credit ratings from Moody’s, Standard & Poor’s, and Fitch and total assets of the 500 largest banks worldwide, Global Finance has put out its list for the past 21 years.

The stability of the list — the Top 10 banks are unchanged from an April update of last year’s rankings — shows that the highest echelon of banks continue to ride out a tumultuous 12 months, from whale-sized trading losses to questions about interest-rate manipulation to allegations of illegal dealings with Iranat some of the world’s big financial institutions. These issues have only increased the concern for the safety and stability of banks.

“More than ever, companies around the world are reevaluating the long-term credit strength of their banks, and partnering with only those banks that have proven strength and stability,” Global Finance’s publisher, Joseph Giarraputo, said in a press release.

The overall strength of the Canadian financial system is evident from the Global Finance list. Canadian banks claimed seven of the Top 50 spots, with five in the Top 25. TD Bank was the top-ranked Canadian bank.

Singapore’s three big banks, as well as the four largest banks in Australia, were also represented, underscoring the relative health of their respective financial systems.

Five U.S. banks made the list, with Bank of New York Mellon , a trust bank, ranking 29th. The other banks on the list included CoBank ACB, US Bancorp , Northern Trust, and Wells Fargo . (Read More:Banks Among S&P Leaders This Year Despite Headwind.)

Want to see who made the Top 50?Click here.

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