FX.co ★ Why US banks start saving money?

In the United States, the coronavirus continues to spread, which puts great pressure on the people's lives and companies' activity. So, the heads of leading banks such as Goldman Sachs, JPMorgan, Bank of America, Citigroup, and Wells Fargo are warning of a tough road to economic recovery in the US.

Goldman Sachs chief David Solomon noted that the opening of businesses undoubtedly influenced the growth of economic activity. However, there is a threat of a weakening of the economic shoot forward as the number of new cases of coronavirus infection rises every day. Lingering uncertainty could complicate further recovery.

In the US, 22 states have either postponed easing of restrictive measures. Unemployment benefits remain stubbornly high at the level of $17 million, although the number of new jobs outside the US agricultural sector increased by 7.5 million.

JPMorgan chief Jamie Dimon also doubts that the recent improvement in macroeconomic statistics will last long. According to the Bank of America forecast, the US economy will not recover from COVID-19 until 2022.

In order to revive the economy, it is necessary to go through 4 stages: containment, stabilization, normalization and growth. Citigroup Leader Michael Korbat believes that the economy is now between the first and second stages. According to him, the stabilization stage implies the removal of some restrictive measures, such as social distancing.

However, Wells Fargo chief Charles Scharf said that the economic recovery will not be quick, even though the Fed has ensured the proper functioning of capital markets. However, containing the spread of the virus turned out to be more difficult than expected. New restrictive measures were reintroduced in some countries.

In this regard, the largest US banks prepared for the worst period of the crisis. For example, JPMorgan, Citigroup and Wells Fargo have spent over $ 28 billion on reserves.

Banks began to save money because they were afraid of clients' failure to repay their debts due to COVID-19. For example, JPMorgan has additional headroom in case the country's unemployment remains high and the economy grows slowly.

The United States is the country with the highest rate of people infected with the coronavirus. The number of patients strikes every day. The American authorities no longer hope for a quick exit from the crisis. According to the latest data, more than 22 million Americans have lost their jobs since the beginning of the outbreak in the country. Since the number of infected people is growing rapidly, quarantine has been reintroduced in some states. This, in turn, reduced economic activity.