Canada and Australia have to worlds soundest banking systems

If you are wondering what countries have the soundest banking systems, the World Economic Forum has surveyed executives and gotten an answer. From Reuters we get these results:

RANKINGS

1. Canada

2. Sweden

3. Luxembourg

4. Australia

5. Denmark

6. Netherlands

7. Belgium

8. New Zealand

9. Ireland

10. Malta 11. Hong Kong

12. Finland

13. Singapore

14. Norway

15. South Africa

16. Switzerland

17. Namibia

18. Chile

19. France

20. Spain

--------------------------------------------

124. Kazakhstan

125. Cambodia

126. Burundi

127. Chad

128. Ethiopia

129. Argentina

130. East Timor

131. Kyrgyz Republic

132. Lesotho

133. Libya

134. Algeria

SOURCE: World Economic Forum Global Competitiveness Report 2008-2009.

(For the full World Economic Forum report click on: here )

This is a very interesting report. Reuters describes the methodology here:

The World Economic Forum's Global Competitiveness Report based its findings on opinions of executives, and handed banks a score between 1.0 (insolvent and possibly requiring a government bailout) and 7.0 (healthy, with sound balance sheets).

Presumably the banks within each country are similar to each other, and the banks between countries have greater differences then the similarities of the banks within each country. The methodology of this survey clearly assumes that banks are characteristic of their respective countries. There is no way to verify or disprove this assumption based on a survey of the opinions of executives.

The survey clearly has two other drawbacks that can be discerned even in this Reuters report. First, the rankings are based on the opinions of executives. While executives can be expected to know how well they are treated by the banks, they are customers rather than bankers. Banks will conceal facts from their customers.

Second, using customer opinions makes the survey outcome-based. The report does not provide any explanation of why the banking systems get the scores they do. What are Canada and Australia doing that Libya and Algeria are not? Presumably the banking systems in the better countries are regulated better than those in the worse banking system. What is the nature of the improved regulation? The pdf file of the original report does ask the executives what factors the executives attribute the different results are caused by. But since these are presumably not bankers their opinions are not necessarily accurate.

It is an interesting report, however. Just rather limited.