The Big Four is the popular colloquial term used to describe the four major banks in a number of countries where the financial sector is largely dominated by four institutions. These banks include HSBC, Citibank, Bank of America and Wachovia. All these establishments have branches in almost all the major cities of the US. Some of these banks have also been listed as DBA or the “doing business as” banks. These are legally permitted to do business in the US under the laws passed by the US Senate, House of Representatives and the presidential administration. It is rare to find any of these institutions listed as members of the Big Six or the “Group of Ten” on the annual listing of the World Leading Banks.
The term “chartered” is taken here in reference to the fact that these institutions are members of the US Banking System and hold shares in the stocks of the System. They generally operate through US Banks and have their offices in New York, London, Tokyo and Rome. But in case they wish to operate through a foreign branch, they need to register with the local BIS (Business Information Systems) in that particular country. This is necessary because they have to follow the regulations that are prescribed by the countries that they want to serve. In addition to this, they also have to comply with the rules and policies that are prescribed by the government in such countries. A chartered bank is not considered a true banking system, even though it may be privately owned.
There are two other types of banks that operate in the US – the discount banks and the credit unions. The discount banks are not-for-profit institutions that have branches in most communities. They engage in the business of lending cash and in giving various loans at favourable interest rates. On the other hand, the credit unions are co-operative institutions that pool resources and lend money to its members, but the members pay an appropriate dividend to the central body that runs the institution.
While there are basically four largest banks in the United States – Bank of America, Citibank, Chase Manhattan, and Wells Fargo – there exist many other subsidiary institutions as well. Among them are the Federal Reserve Bank, which are controlled by a cabinet secretary, three current Fed chairs, and the assistant governor for economic policy. The Federal reserve banks are restricted from commercial operations and have to issue currency only to citizens of their country. The Fed also has a president, who reports directly to the president and is responsible for the formulation of policy for the institution.
In addition to this, there are some international banks that operate in the US. Among them is the International Monetary Fund, which is led by a board of directors and includes a president, vice-chairman and chief economist. Other international banks include those of Switzerland and England. The Commercial Bank of China is the second largest commercial bank in the world, with a balance sheet that is almost as large as that of the New York Stock Exchange. The assets of the Chinese government’s massive and mostly state-owned banks are estimated at more than US $3 trillion.
Besides the big banks, there are also some very large and very small banks all over the US. These include such giants as New York Trust, Wachovia, Bank of New York, Chase Manhattan, Branch Bank, Sun Trust Bank, Fleet Bank, Key Bank, Washington Mutual Bank, and many others. Of these, the New York Trust and Fleet Bank are on the verge of collapse. In addition, there are also a number of very small banks scattered around the nation. These include the local banks in each county.
If we look at the assets held by the biggest banks, it is obvious that they hold a lot of physical assets, including warehouses and other forms of storage facilities. But what they do not have is a huge number of derivatives like securities on foreign currencies, stock options, and bonds. Derivatives refer to any financial asset that is derivative in nature. For instance, if you put your money in a bank and decide to borrow ten million dollars against that bank’s stock, then that is called a derivative. This means that if the stock price goes down, so does the bank’s share value, but if the stock price goes up, so does your bond value.
Most of the banks that have assets and holdings above one billion dollars are community banks. These are mainly SBA or State Department banks which have branches in every community in the country. Community banks give great credit unions and thrift associations a bad name. They are some of the least friendly banks, and while they may have less overall resources, they do give their customers a great deal of good customer service.