The UK banking sector may never recover its once - dominat position in the global economy following the financial crisis of 2008, a new survey revealed on Thursday.
The annual Top 1000 Banking List, published by the Banker magazine, showed that Bank of America remained the largest bank in the world by virtue of Tier 1 capital ratios, closely followed by Citigroup and JP Morgan in the top rankings alongside three Chinese banks. But British banks have slipped down the league table, with the study warning they may never recover their pre-crisis position.
Brian Caplen, editor of the Banker told CNBC the research showed Chinese banks stealing a march on their Western competitors now accounting for 20 percent - the largest share - of all profits taken by banks globally, compared to 10 percent four years ago.
By comparison UK banks now only accounted for five percent of profits shared by the global banking industry compared to accounting for the second largest share of profits globally four years ago.
“We don’t see them [UK banks] recovering very fast because they are facing regulation and they are facing some compensation payouts, they are facing a domestic market which is recovering slowly. And as you know in China everything’s booming,” Caplen added.
He also said that while there were some concerns that China’s economy was overheating, banks in emerging markets like China and Brazil had some of the higher deposit ratios in the world and were therefore not as leveraged as Western banks had been during the financial crisis in 2008.
He also warned against regulators becoming over - zealous in their pursuit of safer markets.
“The danger is the regulators having been too lax pre-crisis now are going to go too stringent. We do want banks to take risks. Banking is about intermediating risk and if you try to make banks too safe then you don’t get them lending and taking risks and the economy doesn’t grow. So that’s the worry," he added.