(Version in Español)
Crises are like stories; they have a beginning, middle, and an end, and on occasion, we learn something along the way.
In times of crisis, choices must be made. In the most recent global economic crisis policymakers moved quickly to stabilize the system, providing massive financial support, which is the right response in the beginning of any crisis. But that only treated the symptoms of the global financial meltdown, and now a rare opportunity is being thrown away to tackle the underlying causes.
Without restructuring financial institutions’ balance sheets and their operations, as well as their assets ‒ loans to over-indebted households and enterprises ‒ the economic recovery will suffer, and the seeds will be sown for the next crisis. (more…)
Filed under: Advanced Economies, Economic Crisis, Financial Crisis, Financial regulation, Financial sector supervision, International Monetary Fund | Tagged: bank balance sheets, cross-border exposures, financial institutions, financial restructuring, financial sector, financial sector reform, financial sector regulation, financial system risk, global economic crisis, nonperforming loans, resolution mechanisms, restructure assets, stress tests, systemic risk | 8 Comments »