Andrew Henderson

Andrew Henderson

Founder of Nomad Capitalist and the world’s most sought-after expert on global citizenship.

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Why US Banks Are Weaker Than You Think

The US is flooded with banks. Be it the first national bank of either state, banks headquartered in another country like TD Bank group, Bank of America, Bank of New York, Fifth Third Bank.

The nation is also home to the investment banking services and investment management services giant JPMorgan Chase, and the bank holding PNC Financial Services Group, along with asset management national banks more institutions offering private banking services and public banking services.

But there is a common misconception that US banks are the benchmark for how strong a bank can be, be it at commercial banking or any other sector.

This is probably due to the narrative that the US itself is the strongest country in the world. 

The truth is, the United States hasn’t been the “strongest” at anything for a while. Sure, you can say that it has the strongest military in the world.

But even then, we would think that China is probably holding back on military funding or something along those lines.

It might offend some people, but the United States has not been that great for a few decades now. Unfortunately, this decline extends into the US banking sector as well. 

Banks in the United States have significantly deteriorated over time. Your money isn’t safe anymore. A better option for you would be to close your US bank account and look elsewhere. We will be discussing the reasons.

Can Banks Go Into Failure?
Can Banks Go Into Failure

Trying to understand the fundamentals of a bank is hard. We don’t think of banks as typical businesses, but the reality isn’t all that different.

Every business has a model, requires innovation, and is constantly evolving. While the banking sector differs from general businesses, the essence of a business, whether it is surviving or failing, still applies to them.

Simply put, the fact that every business has the potential to fail applies to banks too.

That’s exactly one of the reasons why US banks are weaker than you think. A bank failure is a very real possibility, but for some reason, nobody thinks about it.

We don’t imagine our banks failing when we deposit our hard-earned money into them.

Yes, our money is insured to an extent by the FED, but that’s not the reason we don’t imagine things going south. However, the same cannot be said about other businesses. After all, when we invest in a business, we take every possible worst-case scenario into account, don’t we?

We all know what happened in 2008. Remember when banks were very big that bank failure was deemed impossible? 

We did not forget this, which is why we are very particular when it comes to both local and offshore banks for US citizens.

Why US Banks Aren’t Doing Too Well
Why US Banks Aren’t Doing Too Well

The truth is, the perception of banks, in general, is more about what looks good. No country wants its citizens to think that their banks will fail. We’ve grown to imagine banks as entities that aren’t fallible.

Even during a financial crisis, we find it hard to imagine a scenario where our banks would fail us. But here are pragmatic reasons for US banks failing that we have seen before.

1. Flawed Bank Analysis
Flawed Bank Analysis

There needs to be a defined metric to evaluate a bank’s performance. Unfortunately, banks do not have a standard metric. Any aspect that would derive a sub-par evaluation is never taken into consideration. It is casually ignored.

It is highly interesting to note that not one single US bank has made it to the safest offshore banks list for the past five consecutive years, bearing one exception. Yet, our belief in the banking system would convince us otherwise.

Moreover, analysis has more to do with theory than with reality. Over the years, it has been proved that banking theory does not correlate to banking profitability or otherwise. The same goes for US banks. 

Again, theorists and analysts could not be bothered. It’s a gross misrepresentation of the status of the banking sector in the US in particular.

Analysis should be read with caution. Factors that are assessed during the evaluation of any particular US bank must be carefully checked. It must be recognized whether the factors taken into account were of any value to the analysis and whether the result has any representation in the real world.

2. The US Government Policy
The US Government Policy

The US has already nationalized its banking industry, such that it now controls the flow and supply of capital. This has happened gradually over the past two decades.

If you were not paying attention, you likely missed this attempt. The US government knows that a bank failure would cause a major financial crisis due to the interconnectivity of the market. So, to avoid this, the government has created a policy of protecting the banks.

Now, we know what you are thinking. Surely, but because the government is protecting the banks, they’re going to be fine, right?

Well, no. When your government has to ensure that something is working correctly by giving it extra support, it means that there is something wrong. Actions taken by the FED and government regulators continue to raise red flags.

It begs the question. If everything is going well, why do banks need the government’s help?

In the last financial crisis, 4 out of 10 US banks failed or received government assistance. No one cared about the people. Everyone just wanted to make sure that these big companies did not have to shut down.

3. Your Funds Aren’t Safe
Your Funds Aren’t Safe

The fundamentals of US banks are weak without any shadow of a doubt. Let’s take a moment and talk about the status of your money in the bank across the street from you.

The Federal Deposit Insurance Corporation (FDIC) was founded in 1993. Almost all big US banks are FDIC-insured. This means that up to $250,000 per depositor is insured. In the case that something happens to your money in an FDIC-insured bank, you are alright till you exceed that amount.

The fact that the FED has controlled capital flow shows that there is little money left. So, what happens when one of the biggest banks in the US goes down? While you are entitled to up to $250,000, the bad news is there is no way to make up for any money you’ve lost on top of that amount.

Your bank will collapse at the sight of a financial crisis, and the system can not cover any catastrophic fall of any US bank.

4. Liabilities
Liabilities

Banks have kept more cash on hand to defend themselves against a crisis since 2008. Their balance sheets are currently less stretched than they were in 2007. Not every bank has piled up CLOs either.

However, in December, the Financial Stability Board estimated that the average exposure to leveraged loans and CLOs for the 30 safest US banks was around 60% of capital on hand. 

CLOs account for more than 100% of the capital of a few small banks. If the leveraged loan market collapses, their liabilities may swiftly exceed their assets.

5. Recent Events Spell out Trouble
Recent Events Spell out Trouble

Recent events such as the pandemic have made businesses crumble, and US banks are not safe from that.

While the government has used banks as a lending tool, enforced, and promoted US banks to give out loans to help businesses during the pandemic, it is highly likely that businesses would continue to struggle, leading to pressure on US banks.

6. Borrowers’ Default
Borrowers’ Default

What happens when borrowers cannot return loans to the banks? US banks no longer have the same coverage as they once did. If the number of borrowers defaulting on bank loans continues to increase, banks will have a huge problem on their hands.

Even though the FED has taken the responsibility to keep US banks functioning, if the current situation continues, it would not be too long before the situation becomes impossible to manage.

This is primarily not because of how US banks function but largely due to the current financial situation in the US. That said, US banks have not always been up to the mark in making key decisions, so it would be hard to dismiss them from any blame.

7. Stocks & Buybacks
Stocks & Buybacks

The reason US banks are fundamentally flawed is due to the nature of their role in US society. Banks are being used to kick start the economy, with the FED acting as the bank of the banks. How long before the gas runs out is anyone’s guess.

And in all of this, the act of buying back stocks is a tremendously dangerous one. It further weakens the US backs and harms the system.

On the other hand, buying back shares diminishes capital and the bank’s capacity to leverage its balance sheet. The bank will suffer as a result of this. It means the bank will have less raw material to produce and sell. Furthermore, stock repurchases reduce the bank’s secular growth rate of earnings and its current value.

The reality is that US banks’ boards and executives feel that financial engineering is essential to long-term investors rather than developing the firm. This is hurting bank equities greatly. The pledge to buy back stock is also an admission that the banks don’t know what to do next. 

Should they expand? Should they offer more services? These are the questions they should be asking themselves.

Because the fundamentals that determine profits are deteriorating, bank equities are doing poorly. However, the equities are doing worse than projected due to the failure of the consensus theory of bank stock investing. 

Countries with the Best Offshore Banks
Countries with the Best Offshore Banks, Belize

We’ve discussed in detail why US banks are unreliable. But our point isn’t to scare you. It is to give you the information that you deserve and make the correct decisions to enjoy your life in the best way possible.

Knowing that US banks are not what they seem to be, it is important to recognize the best offshore banks out there and to make the change as swiftly as possible.

Instead of going through banks one by one, we’ve compiled a list of countries with the best banks. You can have a look at these countries and decide if it is feasible for you to open an offshore bank account there.

1. Germany
Germany- Countries with the Best Offshore Banks

One of Germany’s banks is ranked first in Global Finance’s most current list of safest banks in the world. Germany has three more spots in the top 10, with six in the top 50 list.

Payments, a German corporation, contributes to Germany’s status as the world’s most secure offshore banking center. It is said to be the country’s stability, particularly economically. Savings, checking, and custody accounts are all available through it.

Because Germany is a sophisticated and contemporary country, account users will have 24/7 access to cutting-edge online bank, instead of branch banking, and ATM services. In many circumstances, you do not need to be physically present in Germany to create an account. 

In addition, the costs of launching and maintaining a business are often modest. Some institutions also allow you to apply for a Visa or MasterCard credit card. If you enjoy traveling, the advantages are considerably larger. 

That is, having a Euro account may be handy all around Europe. Additionally, some institutions offer additional benefits to regular travelers. You can expect complete privacy from these banks too.

2. Belize
Belize- Countries with the Best Offshore Banks

Belize offers a way for you to safely keep your money and get good interest rates too. The actual interest rate in Belize is at 2.3 percent. The inflation rate was just 0.8 percent at the end of 2020 and is expected to be 0.66 percent in 2021.

This is a greater interest rate than the other nations, including both the United States and Canada. If you want to put your money into an account with the highest interest rates possible, there are various options such as Turkey, Azerbaijan and Cambodia. 

However, in terms of asset security, Belize is a much more stable economy.

3. Switzerland
Switzerland- Countries with the Best Offshore Banks

Over 200 financial organizations make up Switzerland’s sophisticated banking sector. As of 2018, the Swiss banking network’s total assets are expected to exceed USD 7 trillion, with foreigners controlling around half of it.

Swiss banks
are prohibited from sharing any information about their clients’ accounts without their consent. They’re very particular that they have some of the tightest privacy requirements in the world.

If your Swiss banker illegally discloses information about your bank account, they might face up to six months in prison and a large fine.

Swiss banks offer the finest privacy and asset protection regulations of any international bank in a politically and economically stable country. A private bank account in Switzerland is one of the best decisions you can make.

Without question, Swiss banks provide the most comprehensive privacy and asset protection requirements of any foreign banking location in such a politically and economically stable country.

4. Hong Kong
Hong Kong- Countries with the Best Offshore Banks
Hong Kong is an excellent choice if you’re searching for a bank alternative to the United States.

Being one of the world’s most profitable and popular financial centers, Hong Kong offers its international banking clients a variety of incentives.

Hong Kong is a popular offshore banking site because of its efficient legal system, fair tax system, and well-developed telecommunications and financial infrastructure.

It’s one of the best places to establish a business since it serves as a tax haven and offers outstanding financial services and global business connections. It is a wonderful way to get into the Chinese market.

5. Nevis (St. Kitts and Nevis)
St. Kitts and Nevis- Countries with the Best Offshore Banks

The island of Nevis is a popular location for offshore banking due to its numerous benefits for businesses.

Individuals and businesses from the United States choose to bank in Nevis, which is located off the coast of the United States.

Companies with a Nevis headquarters can create flexible organizational structures, and Nevis banks offer outstanding asset protection.

Nevis has a simple registration process that may be conducted remotely, and the country offers competitive interest rates.

Choose Better Offshore Banks with Nomad Capitalist
Choose Better Offshore Banks with Nomad Capitalist

If you would like to learn more about US banks and offshore banks, you should contact us.

We are here to legally help you lower your taxes and grow your wealth through offshore banking and other financial services.

Nomad Capitalist will help you ensure that your money is safe, that you’re able to grow your wealth and transition into a global nomad. 

We are responsible for helping our clients with various second passport and residency programs so that they can move to countries where they’re treated best.

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