Forecasts are uninhabited. At a certain moment, the American economy will slow down its growth, even a decline is possible. The pace of development of the economy of Europe, where Germany, perhaps, is already experiencing a decline slowly slow down. In Japan, after a short respite due to the huge amount of funds provided by the government, the decline will continue. What does this mean for the banking systems of these countries? The answer depends on how strong the economic decline will be and whether it will occur at the same time. A strong decline in America, according to optimists, will not cause such damage as it was in the past. American banks have become much larger and diversified, which should help them survive. But since the bulk of the income of American banks comes from lending, which concentrated on a smaller number of borrowers, at the beginning of a sharp economic decline, losses can be significant.
In Europe, banks also depend on the state of the economy. What will happen, for example, with the German industry, if the country falls into a crisis? Banks, especially private ones, will have to increase the level of deductions. The same will happen in other European countries, although in more profitable banking systems, for example, British, such problems can be solved quickly. Japanese banks continue to be in a difficult position. There is a real risk that the country may enter during protracted deflation, when high and growing interest rates cause a large number of bankruptcy. Monetization of this debt – printing money – will reduce the load of debts in a real economy, but can push investors switch from bank deposits to more profitable assets in foreign currencies. Without cheap deposits, Japanese banks will be in a terrible situation, because the markets will require them to be excessive bets.
It is unlikely that the state of things will be worse than in the 30s, when in America alone the economy fell by 30%, and 11,000 banks were closed. But with existing requirements from large income banks with higher risks taken by banks, in order to reach these income, the life of the world banking system in the near future is unlikely to become easier.