International Comparisons: Confidence in National Financial Systems

Last year’s Global Economic Crisis shook the foundations of many financial systems across the world. Financial systems that had engaged in high risk loans suddenly found the bottom falling out from under them. Many countries had to step in to underwrite the bad loans made to prevent a total collapse of their nation’s financial systems. Confidence in these financial systems were greatly affected and reflected in various ways in the stock market.

From 2008-2009 the World Economic Forum in Geneva, Switzerland conducted a survey of top executives in countries around the world asking them to rate their level of confidence in their national financial systems. The highest possible score was 7.0 – a perception that the financial systems were healthy. The lowest possible score was 1.0 – a perception that the nation’s financial system was insolvent and would require a government bailout.

This survey may be of interest to anyone who is planning to retire abroad. Expatriates living abroad will often use banks in foreign countries to house their financial assets. And one of the common questions asked by expatriates who are living abroad is whether or not the banking systems in their new home country are safe.

While no survey is a perfect indicator of reality, the perceptions of top executives around the world about the health of their own nation’s financial system probably are a good indicator about how well many of these nations are weathering the global financial crisis and indirectly provide insights into how well the financial systems managed their own finances. 

Countries With a Very High Degree of Confidence in Their National Financial Systems (6.0 or higher)

Executives in these countries had very high levels of confidence in their national financial systems. Odds are that the financial institutions had not been heavily engaged in risky loans and mortgages. Again, while it is not a perfect indicator, it does suggest that to some degree financial institutions in these countries are likely to be well managed and may be a reasonable place to keep one’s financial assets.

If you are planning to retire abroad, use this only as a first estimate as to the soundness of another country’s financial systems. You should do a little more research and find out a little about the degree to which savings are backed up by the government, the economic and political stability of the country, and the costs of doing banking overseas. 

• Canada:6.7
• New Zealand:6.6
• Australia:6.6
• Chile:6.5
• Hong Kong:6.4
• South Africa:6.4
• Namibia:6.3
• Singapore:6.3
• Panama:6.3
• Brazil:6.3
• Finland:6.3
• Barbados:6.3
• Malta:6.3
• Luxembourg:6.2
• Slovakia:6.2
• Mauritius:6.2
• Qatar:6.2
• Bahrain:6.1
• Israel:6.1
• Norway:6.1
• Sweden:6.0
• Cyprus:6.0
• Trinidad and Tobago:6.0
• Spain:6.0

Countries With a High Degree of Confidence in Their National Financial Systems (5.0 to 5.9)

Countries in this category were still perceived to have relatively sound national financial systems in place by top executives in those countries. While these countries may have been affected by the global economic crisis, executives still perceived their financial institutions to be relatively safe.

Interestingly enough, now that I am living in the Philippines, the scoring seems to be relatively accurate. Financial systems in the Philippines seem not to have been severely affected by the global economic crisis. This however, has not lead me to place all of my financial assets in the Philippines. The level of security that the government will insure is much lower than in the United States, and so I still keep much of my assets there. However, for day to day living, I feel quite comfortable and confident in placing money in local banks to cover my day to day expenses.

• India:5.9
• Peru:5.9
• Austria:5.9
• Senegal:5.9
• Czech Republic:5.9
• Costa Rica:5.8
• Malawi:5.8
• El Salvador:5.8
• SaudiArabia:5.8
• Estonia:5.7
• Oman:5.7
• United Arab Emirates:5.7
• Jordan:5.7
• Malaysia:5.7
• Brunei:5.7
• France:5.7
• Mexico:5.7
• Gambia:5.6
• Thailand:5.6
• Switzerland:5.6
• Greece:5.6
• Guyana:5.6
• Botswana:5.6
• Kuwait:5.6
• Denmark:5.6
• Jamaica:5.5
• Honduras:5.5
• Benin:5.5
• Zambia:5.5
• Colombia:5.4
• Guatemala:5.4
• Croatia:5.4
• Ghana:5.4
• Philippines:5.4
• Dominican Republic:5.4
• Sri_Lanka:5.4
• Kenya:5.4
• Portugal:5.4
• Lithuania:5.4
• Suriname:5.3
• Puerto Rico:5.3
• China:5.2
• Burkina Faso:5.2
• Syria:5.2
• Italy:5.2
• Netherlands:5.2
• Uruguay:5.2
• Montenegro:5.2
• Paraguay:5.2
• Romania:5.2
• Bolivia:5.2
• Tunisia:5.2
• Slovenia:5.2
• Morocco:5.2
• Mozambique:5.1
• Armenia:5.1
• Bosnia and Herzegovina:5.1
• Madagascar:5.1
• Japan:5.0
• Pakistan:5.0
• Egypt:5.0
• Cameroon:5.0
• Uganda:5.0
• Turkey:5.0
• South Korea:5.0
• Georgia:5.0
• Nigeria:5.0
• Poland:5.0

Countries With a Low to Moderate Confidence in Their National Financial Systems (4.0 to 4.9)

Executives in these countries had a somewhat more pessimistic view of their nation’s financial institutions. Some of this is probably caused by the global economic crisis (like in the United States), but may also reflect weaker financial systems in developing countries (like in Chad).

While it is amusing that the Philippines scores higher than the United States in this regard, the strong economic base of the USA combined with the government’s willingness and ability to step in to prevent an economic melt down probably prevented the score from being much lower in the USA. And it is partly for that reason, that I still keep my core assets in the American banking system – despite the problems that have plagued major American banks.

If you plan to retire abroad to any of the countries in this category, it will make a lot of sense for you to research the financial systems in these countries before moving any of your financial assets overseas. If possible, it may make sense to look into a stable international bank that does business abroad in the country that you have chosen for expatriate living.

• Taiwan:4.9
• Belgium:4.9
• Indonesia:4.9
• Cote d’Ivoire:4.9
• Ecuador:4.9
• Nepal:4.8
• Hungary:4.8
• Bangladesh:4.8
• Bulgaria:4.8
• Germany:4.8
• Albania:4.7
• Mali:4.7
• Azerbaijan:4.7
• Tanzania:4.7
• United States:4.7
• Venezuela:4.6
• Serbia:4.6
• Vietnam:4.6
• Nicaragua:4.6
• Mauritania:4.5
• Cambodia:4.4
• Latvia:4.3
• Libya:4.3
• Ethiopia:4.2
• Argentina:4.2
• Lesotho:4.1
• Tajikistan:4.1
• Ireland:4.1
• Russia:4.0
• Chad:4.0
• Burundi:4.0

Countries With a Low Degree of Confidence in Their National Financial Systems (less than 4.0)

These countries fared the worst in the survey. For expatriate living in these countries, it is recommended that anyone who retires abroad there do a fairly exhaustive review of the country’s financial system. And to play it safe, take a look at investing in a stable international bank that might be doing business in the country.

• United Kingdom:3.8
• Algeria:3.7
• Kazakhstan:3.7
• Kyrgyzstan:3.7
• Iceland:3.7
• Zimbabwe:3.6
• Mongolia:3.5
• Ukraine:3.4

Confidence in National Financial Systems: Summary

The results from the World Economic Forum’s survey are presented as a rough guide to evaluate the soundness of a particular country’s financial system. It is based on the perceptions of executives living in those countries. Retirees living abroad are advised to do additional research into the financial system of their new home country before making a decision to move a significant amount of their assets overseas.

(photo by Rafaortman)

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