Bank of America named best bank in the world

Bank of America has received top honors in Global Finance's World's Best Global Banks 2019 Awards. Winners were selected based on performance over the past year and other criteria, including their reputation and management excellence as well as leadership in digital transformation.

The US banking industry has returned to robust health and rules the world in areas such as investment banking fees and advice on corporate restructurings, although the top Chinese banks are far bigger by assets. Bank of America is exemplary of a financial-services industry in the US that is serving the real economy more efficiently and responsibly as a result of its rapid adjustment to regulatory and technological change.

The selection of a US bank as the global winner comes at a time when European banks are still struggling with relatively high levels of impaired assets, low profitability, slow economic growth and negative interest rates. UK banks, in particular, face Brexit-related uncertainties.

Meanwhile, a further slowdown in growth in China amid US-launched tariffs could put Asian banks at risk, according to Fitch Ratings. Banks in Asia's tradedependent markets, such as Hong Kong, Singapore and Taiwan, could face credit pressures in the hypothetical case of a steep economic downturn in China triggered by US tariffs, Fitch says. The rating agency says Hong Kong banks have the most direct exposure to a slowdown in China, not to mention the effect of protests on the city's economy. Emerging markets could also be hit by an investor shift away from assets and markets that are perceived as risky, Fitch says.

Bank-rating outlooks worldwide have become more skewed toward the negative this year, Fitch says, with the share of negative outlooks rising to 17% at the end of the first half, from 13% at the end of last year. Much of the deterioration was due to negative watches on UK banks due to Brexit.

More than 80% of bank downgrades were in emerging markets, notably in Latin America, with deteriorating local operating environments putting pressure on banks or reducing the scope for them to receive support from state authorities if necessary, Fitch said. Emerging markets in the Americas had the highest share of negative bank-rating outlooks, at 37%, mostly reflecting the status of the sovereign rating of their home country. Negative outlooks on Turkish banks also contributed to the rise globally.

While the well-capitalized US banks appear better positioned to withstand any future financial crises, recent moves to ease regulatory restraints could be allowing new risks to build up in the system. For example, some of the restrictions on proprietary trading imposed on US banks by the Volcker Rule-part of the DoddFrank Wall Street Reform and Consumer Protection Act passed in the wake of the financial crisis-are being significantly weakened. The Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency announced on August 20 rule changes to ease restrictions on proprietary trading and on bank ownership of hedge funds and private equity funds.

The move drew criticism from some corners. Former FDIC Chair Martin Gruenberg, who remains a member of the FDIC board of directors, voted against the recent rule change, saying it would "allow the largest, most systemically important banks and bank holding companies to engage in speculative proprietary trading funded with FDIC-insured deposits."

Others, such as Comptroller of the Currency Joseph Otting, are in favor of simplifying the Volcker Rule "in a common-sense way that preserves the safety and soundness of the federal banking system and eliminates unintended consequences of the prior rule." Following expected approval by the Commodity Futures Trading Commission, the Federal Reserve Board and the Securities and Exchange Commission, the changes would go into effect on January 1, 2020, with a compliance date one year later.

Systemic concerns are beginning to fade, but regulators remain cautious. In July 2019, the US economic expansion became the longest on record. "With the recent lowering of short-term interest rates and inversion of the yield curve in the second quarter, new challenges for banks in lending and funding may emerge," said FDIC Chair Jelena McWilliams.