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Talking Point
However, in line with the improved macroeconomic outlook, recent developments clearly point upwards. Household lending has increasingly improved since last spring, though the expansion is still weak and levels are down yoy. Corporate lending has staged a classic V-shaped recovery and is now back in positive territory. Apparently, lending in America has turned the corner. Even more striking is the fact that private-sector deposit volumes have continuously outpaced lending since the demise of Lehman Brothers. Growth rates have recently entered the double digits and are at their highest level for the past two decades. Most of the growth, however, has come from flows into large non-interestbearing transaction accounts that are fully government-insured (beyond the normal USD 250,000 threshold). This crisis-induced measure, a part of the FDICs Temporary Liquidity Guarantee Programme, is due to expire at the end of the year. It therefore remains to be seen whether the strong rise in deposits can be sustained. Moreover, the bulk of the funds probably relates to the build-up of liquidity by highly profitable businesses in an unsteady macroeconomic environment, while household savings rates continue to be low. Hence, once brighter corporate sentiment prompts firms to increase investments, banks may experience deposit outflows. This could lead to lending and deposit growth rates converging again and possibly even before the end of this year.
...more information on banking and financial markets Talking Point - Archive Jan Schildbach (+49) 69 910-31717
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