Do you care about bank's financials?

[inector]

Hi,

Do you care about foreign bank's financials if they give you green light? Assuming a bank is in reputable jurisdiction, but it's like smaller than most of EMIs.

How much would you trust them with?

Thanks

 

[Martin Everson]

Do you care about foreign bank's financials if they give you green light?

Yes 100%

Assuming a bank is in reputable jurisdiction, but it's like smaller than most of EMIs.

Run

How much would you trust them with?

Zero

 

[inector]

Yes 100%
Run
Zero

3 words of wisdom, thanks.

Any advice on how to read them properly? Maybe an article of some sort?

Also, how small is too small for a bank in terms of assets (I assume it's a good indicator)? 100M / 200M / 500M?

 

[Martin Everson]

Any advice on how to read them properly?

Just look at the balance sheet firstly and see assets and liabilities. Then just look at the P/L. It's also best to look at the latest quarterly report rather than annual depending on time of year.

See below thread where I looked through Maerki Baumann Bank and determined it was unprofitable garbage ripe for a takeover hence their pivot to crypto.

https://www.offshorecorptalk.com/threads/maerki-baumann-bank.37983/post-221227

Also, how small is too small for a bank in terms of assets (I assume it's a good indicator)? 100M / 200M / 500M?

Size matters...no pun intended. But equally as important is the systematic importance of a bank in the country it operates. For example BOV in Malta is a systematically important bank so will be aided by gov. Same with BoG in Georgia, RBS (Natwest) in UK and CS in Switzerland etc. The gov will always aid such banks if they will have material effect on population or industry.

So there is no magic size as a 10m bank could be as safe as a 1bn bank if it is a systemically important institution in the country. So for example if you see a bank with $40m in deposits and its P/L has been -1,800,000 (loss) for like 2-3 years and it is not systematically important then run away - especially if its in some banana republic like my own etc.

Another example is I had for example been warning people for years about EPB - full reserve bank or not means nothing as EMI's go bust everday due to operating costs and they are full reserve also. Had they published their financials instead of keeping it private people would have been able to see early on they did not make money and you were at risk banking with them. People can argue all they want over real reason it got closed but that is neither here nor there sadly. Always take a glimpse of the balance sheet and if they don't publish financials then at best just use it as a pass-through bank and nothing more!!!

 

[inector]

See below thread where I looked through Maerki Baumann Bank and determined it was unprofitable garbage ripe for a takeover hence their pivot to crypto.

This thread was my main reason to start looking into bank financials back then Thanks for it.

systemically important institution

BoG, CS, and BOV in Malta are great examples, thanks.

When it's not state-owned, like ABC in Mauritius / Adriatic in Podgorica, is there a way to determine bank's importance? My idea was maybe from financials, like value of securities that they hold compared to other local banks?

 

[Martin Everson]

When it's not state-owned, like ABC in Mauritius / Adriatic in Podgorica, is there a way to determine bank's importance? My idea was maybe from financials, like value of securities that they hold compared to other local banks?

Normally the government lists them for each country somewhere. But Wikipedia may help with a few countries below.

https://en.wikipedia.org/wiki/List_of_systemically_important_banks
You cannot tell from financials if it is D-SIB. Best to even ask government if in doubt for smaller countries.

 

[backpacker]

BoG, CS, and BOV in Malta are great examples, thanks.

Maybe.
Smaller countries very often lack resources to "aid" it's banks during a crisis.
Georgia, for instance, will have a hard time supporting BoG/TBC since these banks are too large for government coffers.

And then we have Cyprus ....

So, simple strategy: Do not exceed the maximum insured amount. If that amount is too low (for you), either look elsewhere, split the amount between different banks of the same jurisdiction or put your money in securities (bonds, stocks, ETF,. mutual fund). For the latter option, make sure that these assets are separated.

 

[Konstanz]

Just don't keep all eggs in one basket. You can use multiple EMIs, banks.

 

[Martin Everson]

So, simple strategy: Do not exceed the maximum insured amount.

That's no guarantee depending on country. During last financial crisis US FDIC was days away from going bust. I discussed this below in 2022. Look at 2009 FDIC balance sheet for yourself....lol.

https://www.offshorecorptalk.com/th...tside-the-u-s-a-be-devalued.36740/post-205801

If that amount is too low (for you), either look elsewhere, split the amount between different banks of the same jurisdiction or put your money in securities (bonds, stocks, ETF,. mutual fund). For the latter option, make sure that these assets are separated.

AAA Government Treasury Bills are best option . I discussed this also below back in 2020. Just find a nice AAA liquidity fund that invests in short terms treasury bills and park your money there if you don't want to buy the bills directly.

https://www.offshorecorptalk.com/threads/stored-value-vs-bank-accounts.28241/post-121804