The United States slipped from first to third place after the U.K. and Australia in a ranking of financial development released by the World Economic Forum on Thursday, as the global financial crisis badly hurt bank stability in developed countries.

While most of the 55 countries covered by the report saw a significant drop in their financial scores, emerging economies fared comparatively better in the ranking, which takes into account some 120 variables from stability to size and depth of capital markets.

Developed nations are still leading the ranking, but in the past 12 months they have performed so much worse than emerging countries that their lead narrowed significantly, WEF chief operating officer Kevin Steinberg told reporters.

This year they dropped so much that they don't have a lap of advantage in relation to emerging countries anymore, he said, stressing that evidence shows stable and developed financial markets are preconditions for economic growth.

Growing financial instability was the main issue for developed countries in the past year, while lack of access to capital markets and banking services remains an ongoing challenge for developed economies.

There is a trade-off, said RGE Global Monitor's Nouriel Roubini, a co-author of the study. Countries with more regulation in financial systems are more stable, but access to credit is much weaker.

Roubini noted that, while financial stability is important, overtime financial innovation is key to provide the necessary financing to the economy and ensure growth.

In a sub-ranking of financial stability, U.K. and U.S. banks tumbled to the 37th and 38th positions, much below emerging countries such as Mexico and Brazil (at 14th and 15th places respectively) and only a few positions ahead of Venezuela (at 42nd place).

Norway, Switzerland, Hong Kong and Chile lead the financial stability ranking, while Argentina, Kazakhstan and Ukraine are at the bottom of the list.

GERMANY, FRANCE SLUMP

Germany and France suffered a heavy fall in their overall scores that pulled them out of the top 10 group of most developed financial systems.

Australia, one of the first countries to start withdrawing monetary stimulus, rose from the 11th to the second position on the overall index, underpinned by a combination of bank efficiency and stability, as well as low risk of sovereign debt crisis.

Australia and Brazil were among the few countries to see a modest improvement in their overall financial development indicator, despite the impact of the crisis.

At the bottom of the overall ranking are Ukraine, Bangladesh and Venezuela.

United kingdom Argentina Mexico Ukraine