How Much Wealth Do Banks Control Globally?

How much money do banks control globally? The short answer is “all of it.” By definition, the global banking industry controls the capital markets of the world, sets interest rates, and controls the flow of capital around the globe. But to ask how much money they control we need to know what the global banking industry is.

During the eighties and nineties, global banking and capital market services experienced an unprecedented proliferation, mainly as a result of increased demand from companies, governments, and financial institutions that were becoming more international in scope and looking for financial services that could meet their needs. At the time, market conditions were ideal for this sort of expansion, with interest rates on U.S. Treasury notes declining from about 15% for two-year U.S. Treasury notes to about 5% over a 20-year period, and U.S. financial assets growing at approximately twice the rate of the rest of the world economy. An infusion of foreign investment, particularly from Japan, fueled this growth and transformed the U.S. stock market into the largest in the world. American corporations, in turn, started investment opportunities abroad, as a result of the deregulation of foreign financial markets. This prompted the development of U.S. mutual funds specializing in trading on foreign stock markets.

The growth of globalization fueled financial opportunities and changed the global banking landscape entirely – it broke down previously inviolate barriers between retail and investment banks, as well as investment banks and private corporations. In this respect, American banks became more like the “universal banks” of Europe, they are free to engage in both investment banking opportunities as well as provide retail services

By the end of 2000, the top ten banks were commanding a market share of more than 80% and the top five, 55%. Of the top ten banks ranked by market share, seven were large universal-type banks (three American and four European), and the remaining three were large U.S. investment banks who between them accounted for a 33% market share.

Today, with other non-banking financial service providers entering the investment banking scene such as hedge funds, insurance companies, and mutual funds the distinction between financial institutions is becoming more and more blurred.