Whilst Australians have long suffered from having the world’s most expensive banking system courtesy of a local cartel, it is proving to be a huge asset during the global financial crisis.

Who would have thought that Citigroup, which for much of the past 15 years has been the world’s biggest bank, would one day be less than valuable than all of our Big Four banks?

That happened for the first time last night when Citigroup shares fell another 18% to a record low of $US3.83, bringing the loss over two days to almost 40%.

Bank of America shares also tumbled 19% last night as the US government prepared to reportedly inject another $US15 billion in equity whilst back-stopping another $US100 billion in toxic assets. We should hear more with the latest BoA results this evening, but such a deal would be similar to the additional bailout that Citigroup got on top of the $US100 billion that was injected into the 9 biggest US banks last October.

Bank of America and its forced merger partner Merrill Lynch shared in $US25 billion of these funds, meaning there are now only eight of those bailout banks still standing.

Based on an exchange rate of US68.33c, here is how the biggest US and Australian banks line up in terms of market capitalisation and we’ve included links so you can see for yourself:

  1. JP Morgan: $US90.85bn ($A135.9bn)
  2. Wells Fargo: $US83.85bn ($A125.46bn)
  3. Bank of America: $US53.19bn ($A79.6bn)
  4. Goldman Sachs: $US32.64bn ($A48.84bn)
  5. Westpac: $46.55bn
  6. Commonwealth Bank:$40.2bn
  7. Bank of New York Mellon Corp: $US26.73bn ($A40bn)
  8. National Australia Bank: $37.5bn
  9. ANZ: $31.44bn
  10. Citigroup: $US20.87 billion ($A31.23bn)
  11. Morgan Stanley: $US17.03bn ($A$25.48bn)
  12. State Street: $US16.41bn ($A24.55bn)

The Big Four are today capitalised at $156 billion which is incredibly healthy in the global context.

However, they still may need to raise some new equity for the huge challenge of refinancing all those hundreds of billions owed to the fleeing foreign banks.

Alan Kohler produced this interesting column on Business Spectator this morning arguing that the banks have got too much power courtesy of Kevin Rudd’s guarantee and are crowding out the market.

The big question is exactly who they will on-lend the $40 billion raised in offshore bond markets over the past few weeks. Given that state governments can’t raise a dime at the moment without a government guarantee, maybe they should start borrowing directly from the big banks.

And who can forget those full page newspaper advertisements placed by ANZ over the years trumpeting the way it had helped Owen Hegarty launch and grow Oxiana Resources from nothing to a multi-billion-dollar company?

So, where is ANZ during the hour of need for Oz Minerals? Nowhere to be seen, it seems, even though the assets are clearly worth far more than the $1 billion in liabilities.

If foreign banks such as Society Generale really want to get out of their Oz Minerals exposures, then the Australian banks should be stepping up.

ANZ raised a whopping $4 billion offshore last week and some of these funds should be forwarded to Oz Minerals.

Peter Fray

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