The wizardry of Harry Potter’s bank

Financial engineer studies ‘too-big-to-fail’ Gringotts

Those of us in the muggle world have plenty of choices for our banking — ranging from megabanks to small credit unions — but that is not the case for the witches and wizards in the world created by J.K. Rowling. Gringotts Wizarding Bank, depicted throughout the “Harry Potter” book and movie series, is a monopoly for those living in the Potterverse.

Zachary Feinstein, assistant professor of electrical and systems engineering in the School of Engineering & Applied Science at Washington University in St. Louis, explored the outcome of dividing up Gringotts Wizarding Bank using the latest in financial mathematics research.


“The concentration of power and wealth in a single bank such as Gringotts needs to be taken into account when considering the financial security of the entire wizarding economy,” Feinstein said. “Gringotts certainly is too-big-to-fail.”

In a case study entitled “Harry Potter and the Goblin Bank of Gringotts,” Feinstein applied systemic risk analysis to assess the financial repercussions of splitting up Gringotts Wizarding Bank to stave off the worst economic outcomes that could occur in the event of a return by Voldemort or the release of magical creatures into the muggle world. In doing so, he found the currency exchange rates —  Wizarding Galleons to British Pounds and U.S. Dollars — and the cost of Hogwarts tuition.

“One of the more interesting things I found while studying the size of the wizarding economy was that the economy was so large, tuition at Hogwarts would cost on the order of £2.5 million, or $3.7 million per year per student,” Feinstein said. “However, the Ministry of Magic pays full tuition, so no student would have to take out loans.”

Though incredibly expensive for muggles, this is manageable in comparison to the $8.4 million in GDP per capita. Feinstein explained, “When we normalize to GDP per capita, Hogwarts’ tuition turns out to be much more manageable; about the same as $24,000 per year in muggle currency.”

As for the financial stability of the wizarding financial sector, Feinstein concluded that although it is too-big-to-fail, Gringotts should be left whole. This fact, according to Feinstein, is mathematically supported by his financial model. It is a fictional data crunch with real-world applications.

“In my research, we study systemic risk,” Feinstein explained. “How we model it, how we measure it. I studied the wizarding world of Harry Potter because it really gives us a single institution that is truly the worst-case scenario of too-big-to-fail.

“What I found, backed up analytically, was that the losses caused by the broken-up system are orders of magnitude larger than the losses caused by Gringotts itself. This is on the order of billions of dollars, more than 10 percent, and sometimes up to 40 to 50 percent of GDP.”

Feinstein is quick to state this work is only in regards to the events of a financial crisis — as the return of Voldemort would cause. It does not account for other motivating factors of breaking up too-big-to-fail institutions: from worries of political clout to the adverse effects of moral hazard on investments.

Rowling’s wizarding world, complete with the too-big-to-fail Gringotts, returns to the big screen Nov. 18 with the widely anticipated “Fantastic Beasts and Where to Find Them.”

Feinstein studies financial risk in the banking sector, and regularly delves into the intersection of financial engineering and pop culture at his blog, Fictionomics. He is available for interviews at

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