Changes in the financial climate

Latin America showed the lowest net financial assets in 2015, putting it at the bottom of the regional ranking list for the first time. Though the gross financial assets of private households in the countries reviewed was up 6.5 percent in 2015 – surprisingly, much of this due to savings in life insurance and pensions – any gains were offset by inflation. There were signs of growing wealth in the middle class; however, it is a small subset of the economy. More than 90 percent of the population belongs to the globally-defined lower wealth class. One of the biggest challenges facing Latin America will continue to be a better distribution of income and wealth within the individual societies and countering the increasing risk of poverty.

North America maintained its number one spot as the richest region in the world. Not only does North America (the USA and Canada, in particular) hold the highest proportion of the world’s financial assets (just under 45 percent), as a region, it shows the highest per capita assets. To put it another way, North America is home to more than one quarter of the people in the world considered to be high-wealth individuals. On the other side of the balance sheet, North Americans also hold most of the global debt (about 38% in 2015). This number, however, has fallen rapidly since the 2008 financial crisis when households began to tighten their belts in reaction to a drop in their portfolios.

The total savings of Western European households hit a record value of 35 trillion euros in 2015. Indeed, when factoring in for the regions slower economic growth, financial assets grew at a faster rate in Western Europe than they did in North America or in developed countries as a whole. That said, too many of these assets are resting dormant in bank deposits. In general, the northern part of Western Europe performed better than the southern part, whose overall results were dragged down by ongoing problems in Greece. Swiss households retained their gold medal for being the world’s richest.

Asset growth slackened considerably in Eastern European EU member states. Although household savings grew at a rate much faster than the global average, the pace of growth slowed for what is now the third year running. This is due, in part, to Eastern European’s proclivity to squirrel away savings in low-interest bank deposits and the Swiss National Bank’s decision to end the upper cap on the Swiss franc’s exchange rate. The decision has put tremendous strain on homeowners, particularly in Romania, Croatia and Poland, who took out mortgages in Swiss francs to benefit from lower interest rates and are now having to repay those loans in currencies that have lost value in comparison. Eastern European countries outside the EU are a bit of a paradox. Savings are dynamic (almost 19 percent a year over the last 10 years), but so are liabilities, which have been growing at an even faster pace in a long-term average (almost 28 percent a year). Even so, the five countries reviewed have certainly made progress. When looking at Eastern Europe as a whole, their share of net financial assets has increased by 19 percentage points since the end of 2005 to total 47 percent.

Asset development in Asia was robust and dynamic. Even when factoring in debt, assets held by private households in the region were up 10.3 percent year-on-year in net terms. In gross terms, the financial assets of private households rose to 42.3 trillion euros; almost double that of 2005. China remains the top performer, with households seeing their assets swell by 18.3 percent. Growth in Japan, as in the other industrialized countries studied, was anemic. That said, Chinese and Japanese households held a combined total of 80 percent of Asian gross financial assets, showing a tremendous wealth gap compared to the remaining eight countries. The difference in wealth development is even more pronounced when looking at per-capita performance. Singaporeans were the most prosperous in the region, followed by Japan, Taiwan, Israel and South Korea: here, per-capita assets ranged from 49,600 euros to 114,160 euros. Malaysia, China, Thailand, India and Indonesia, on the other hand, all failed to cross the 10,000-euro benchmark in per-capita GDP, and even this group of five’s top-performers, Malaysia and China, had gross financial assets of only 14,960 euros and 14,280 euros respectively.

At the end of 2015, the share of the population in this region that had high net financial assets in a global comparison (40 percent) was second only to North America (41 percent). And, indeed, coming in at almost 120,520 euros in Australia and 90,600 euros in New Zealand, average per capita financial assets were high. However, these figures are misleading. When factoring in for debt, Australian’s wealth plummets down by more than half; well below New Zealand’s overall performance. This is due to Australian households appetite for debt. Though it was curbed somewhat following the financial crisis, an increase in immigration has been pushing up prices on the housing market. The debt level in this region rose by as much as 7 percent year-on-year in 2015; the same rate at which financial assets held in bank deposits securities, insurance policies and pensions grew.