The banking environment

The prospects for the global economy in 2007 remain favourable: irrespective of the slowdown in economic growth in the first half of the year (spreading from the US), the world economy is likely to expand further along its stable growth path, supported by the strong integration of the Far Eastern economies. Growth will be more balanced than in 2006; the euro area will continue to experience growth, albeit at a slightly lower rate (2.3 % after 2.8 %). The increasing focus of central banks on stability will lead to further interest rate increases; the yield curve is likely to be shifted upwards although remaining flat along the maturity spectrum. Risk premiums for shares, corporate bonds, emerging markets investments and especially for credit risk are currently lower than for many years. The recent market correction at the end of February 2007 has shown that the high valuation levels involve risks of setbacks; any factors that prompt corrections are to be found outside the economic sphere and are difficult to assess.

Continued global economic growth