Table of Contents
- DATAMONITOR VIEW
- ANALYSIS
- Datamonitor believes that 2008-09 will be characterized by struggling
economies worldwide
- Rising interest rates, excessive borrowing and negative savings rates
have combined in a perfect storm that will shake most of the world' s
economies
- The widespread securitization of loans will compound this problem
- Consumers were not alone in overextending themselves; state debt
servicing is up against budget, while tax revenues are sharply down, which
may signal a muni bond crisis ahead
- The US economy is not healthy enough to ' expand' itself out of these
conditions
- Foreign direct investment may also boost the economy; unfortunately
foreign investors have run for the hills
- A continued Treasury sell-off may further depress the dollar and, at
worst, force interest rate hikes
- Another major terrorist attack in the US will destabilize the economy
further
- Market capitalization, to varying degrees, will fall worldwide as US
stock markets continue their jitters
- With consumers seeking safe havens, banks will compete fiercely to
secure share of wallet
- Inter-bank rivalry will be exacerbated by competition from alternative
savings and investments providers
- In key economies, savings deposits will hold their own against
alternative vehicles
- DURING THE DOWNTURN, THE RACE WILL BE TO THE SWIFT; A FOCUSED EFFORT WILL
YIELD RESULTS IN THE RECOVERY
- Early strategies must focus on maintaining rate parity
- Customers will be keen to optimize tax-free savings
- Online savings accounts and money market accounts will provide quick
wins
- Providers operating with downsized budgets can optimize effectiveness
through focused and targeted marketing
- Banks that can harness investments in customer relationship management
will optimize the opportunities that an expanded customer base offers
- Deepening and expanding customer ties will be key
- Customers are more likely to reward those providers who offer innovative
solutions for improving their overall financial position
- During the downturn, despite the influx into savings products,
consumers will also be dealing with debt
- Exchange rate volatility presents opportunities for gains
- As stock markets begin to recover, the trick will be to hold on to
savings customers
- Falling interest rates will provide new opportunities for banks
- APPENDIX
- Definitions
- Capital protected product
- Certificate of deposit (CD)
- Customer relationship management (CRM)
- Fixed income annuity
- Fixed income instruments
- ISA
- Offset account
- Structured product
- Sweep account
- Whole life insurance
- Methodology
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Figures
- Figure 1: General obligation and revenue muni yields have increased in
recent weeks, while Treasury yields have decreased, indicating a shift
from munis to Treasuries
- Figure 2: The US has run a trade deficit since 2001
- Figure 3: US dollar exchange rates have fallen against the European
currencies since the last market downturn
- Figure 4: Deposits as a % of retail savings & investments, UK, US,
China, India, 2002-11
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