We're coming to the end of another volatile year for the economy and financial markets.

How is that affecting the banking sector and what can banks balance sheets tell us about the health of the economy?

I think the overall message from the banks is that the economy is strong today, but

there's a lot of uncertainty about what will happen.

I'm Allison Nathan and this is exchanges at Goldman Sachs. To help stood light on the sector, I'm sitting down with Richard Ramston, the business

unit leader of the Financials Group in Goldman Sachs Research and Alex Bostin, who covers

the asset management industry for Goldman Sachs research.

Richard Alex, welcome to the program.

Thank you for having us.

Great to be here.

Richard, let's start with you.

Banks are often seen as a bellwether or a leading indicator for the economy.

Why is that? I think banks are most macro of the micro

sectors and by that what I mean is that the drivers of a bank's income

statement are really macro variables.

So if you think about revenue, it's really a function of the level of interest rates,

the trajectory of interest rates.

It's driven by loan demand and changes in loan demand.

Credit quality is a function of factors like unemployment as well as expectations of

changes in unemployment as well as factors like corporate defaults.

So I think a lot of investors often look at banks as a leading indicator of not just what

is happening in the economy, but what could happen over the next six to 12 months.

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