Commercial banks could witness a sudden rise in savings as risk-aversion would encourage people to save more, according to Anshu Jain, head of global markets for Deutsche Bank.
However, he said the challenge would be to channelise these savings – which will come mainly out of government spendings aimed at reviving economic demand – into loans for firms and individuals.
Since September 2008, a sum of $5 trillion has been announced in various stimulus packages by different governments globally. This will result in surplus cash finding its way into the hands of consumers.
The recently concluded G-20 summit in London, which committed a total spend of $1.1 trillion to revive the global economy, said that governments – as a part of the stimulus package – would disburse a combined sum of $5 trillion over the next two years, which would raise the global output by 4 per cent.
However Jain, who was addressing a function organised by his alma mater Shri Ram College of Commerce, predicts that the current lack of confidence among investors will continue and consumers will tend to save rather than spend or invest.
This will result in a surge of savings at banks and the challenge for a banker would be to convert the cash into investments that would, in the long run, facilitate lending.
“The sub-prime crisis was a necessary correction in the US economy, which radiated to other economies around the globe. But I believe that the worst is behind us and we are in the middle of a recovery process,” he said.
Jain was recently elevated to the board of management at Deutsche Bank along with three other executives. The move was seen as widening the field for a potential successor to the current chief executive officer Josef Ackermann.
