Storm Clouds
In our first scenario, the U.S. economy continues on its path of anemic growth with a constant threat of financial system instability. The federal government maintains a stringent regulatory environment and continues to enforce significant penalties on national and regional banks for noncompliance. Interest rates remain depressed for an extended period.
In Europe, growth remains stagnant. Forced to reduce assets and to clean balance sheets in line with regulations, European banks increasingly look to exit international operations.
In emerging markets, growth resumes primarily due to favorable demographics. These countries also establish robust regulatory mechanisms that permit overseas investment and participation. China continues to build on its global economic dominance. Its participation in the Trans-Pacific trade agreement provides a significant economic boost, but its growth rates fall to the 6 to 7 percent range as domestic consumer demand fails to offset weak U.S. and European demand.
While technology advances and niche digital banking players emerge, they do not achieve the required level of scale to be successful, primarily because of an inability to develop trust with consumers.
Storm Clouds
In our first scenario, the U.S. economy continues on its path of anemic growth with a constant threat of financial system instability. The federal government maintains a stringent regulatory environment and continues to enforce significant penalties on national and regional banks for noncompliance. Interest rates remain depressed for an extended period.
In Europe, growth remains stagnant. Forced to reduce assets and to clean balance sheets in line with regulations, European banks increasingly look to exit international operations.
In emerging markets, growth resumes primarily due to favorable demographics. These countries also establish robust regulatory mechanisms that permit overseas investment and participation. China continues to build on its global economic dominance. Its participation in the Trans-Pacific trade agreement provides a significant economic boost, but its growth rates fall to the 6 to 7 percent range as domestic consumer demand fails to offset weak U.S. and European demand.
While technology advances and niche digital banking players emerge, they do not achieve the required level of scale to be successful, primarily because of an inability to develop trust with consumers.
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