US Bank Sector Asset Transactions Surpass $1 Trillion... First Time Since Financial Crisis

The total asset trading balance of stocks, bonds, derivatives, and other assets in the U.S. banking industry has surpassed $1 trillion (approximately 1,393 trillion KRW). This is the highest level since the 2008 financial crisis.

According to BankRegData, a financial tracking agency cited by major foreign media on the 17th (local time), the U.S. banking industry’s asset trading balance exceeded $1 trillion at the end of the third quarter, approaching a new record surpassing the previous high set in the first quarter of 2008.

Reuters Yonhap News

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The increase in asset trading was driven by large investment banks. Among them, JP Morgan accounted for the largest share, with an asset trading volume of $506 billion at the end of the third quarter, representing about half of the industry's total trading balance. This is a 53% surge compared to the beginning of the year ($329 billion).

Other major financial firms such as Citigroup, Bank of America (BoA), and Wells Fargo also increased their trading volumes, while investment banks like Goldman Sachs and Morgan Stanley, which have a higher proportion of direct investments than loans, recorded their highest asset trading levels in years.

The products that large banks concentrated on purchasing were common stocks without special conditions or additional rights. In JP Morgan’s case, it was confirmed that they held approximately $190 billion worth of common stocks at the end of the third quarter, more than double the amount at the beginning of the year ($85 billion). Additionally, the holdings of asset-backed securities (ABS) increased, and bonds based on consumer debt such as credit card payments and auto installment financing gained popularity.

Foreign media explained the background of the asset trading increase by stating that financial institutions are actively engaging in liquidity supply businesses that improve market stability and trading environments, thereby seeking to generate profits.

Bill Moreland, CEO of BankRegData, diagnosed, "Banks are putting the cash they held into asset trading," adding, "They invest money in financial assets rather than loans because that is where they see profits."

However, foreign media also pointed out that as banks hold more price-sensitive securities, they are more exposed to market volatility than ever since the financial crisis. Asset trading by financial firms was a factor that triggered the funding crisis for banks during the 2008 financial crisis. At that time, banks engaged heavily in direct trading and were pushed into crisis, leading to subsequent legal revisions that prohibited banks from directly investing in speculative assets with their own capital.

Industry experts believe that even though banks’ asset trading has surged, it is not yet at a level that raises concerns about a financial crisis like before. Since the enactment of the Dodd-Frank Act in the U.S. after the financial crisis, it has become difficult for banks to make independent bets or misuse depositors’ funds, and the scale of asset trading still accounts for only 4% of the total assets of the banking industry.

Veteran banking analyst Christopher Wollen analyzed, "Nowadays, banks’ business models generally involve selling securities and investments to others rather than holding them directly," adding, "Of course, even if the asset trading market grows, they cannot sell everything they want."

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