Business Policy and Strategy (SMUnit 2 of 3-4)

BBA 4951, Business Policy and Strategy
SMUNIT 2 of 3-Economic variables affecting banks
Name
Course
Instructor
Date
Economic factors affect banks, and one of the main variables is unemployment levels in the county and state. Even though, people may bank their money from anywhere, an increase in unemployment rate in the state reduces the level of savings and disposable income among local residents. This also leads to reduced growth in businesses because of decrease in demand in goods and services. Thus, the banks hold less money and cannot lend to get profit from loans.
Change in income levels also affects the performance of banks, because the fall in disposable income arises during rising unemployment, and in times of inflation there is also low demand for banking services and vice versa.
There is a gradual shift in the demographics with more people retiring, and hence the banking industry is optimistic that in the short term there will be increased business opportunities. Older people tend to be more financially stable after years of working and likely hold money through investments.
Tax laws and increa...