9 Aug 2013

Barclays vs UK GDP

When I commented on Shaun Richards's blog about Barclays Bank he responded:
"The next number two numbers may also provide some food for thought on the amount of credit around. Barclays balance sheet size £1.56 trillion. UK GDP (seasonally adjusted) for the latest 4 quarters £1.51 trillion...."
The basic formula for a balance sheet is

Assets = Liabilities + Shareholders' Equity

And for a bank it's assets are made up of reserves, buildings, and its investments and loans. And the total, just for Barclays Bank, is more than the GDP of the UK.

This is how they can report half year profits of £3.6bn. And while this seems a huge number, it is only about 0.25% of their assets. But it's also what makes them "too big to fail". A disruption on a par with the GDP of the UK would be a disaster.

HSBC has total assets of £1.7 trillion.
RBS has total assets of  £1.4 trillion.

This is also suggests why bankers salaries and bonuses are so high - each bank manages assets on the scale of a moderately sized country. By comparison US based Goldman Sachs has assets of ca. £6.18 trillion and the net worth of the UK (effectively the county's balance sheet) was £6.8 trillion.

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Keep is seemly & on-topic. Thanks.