A return of new NPL flows to normal values will reduce the cost of credit risk. More intensive economic activity will spur households’ and firms’ demand for loans and financial services; eventually, profits could be boosted by higher interest rates.
First, the supply of ample liquidity by central banks, together with governments' measures to restore financial system stability, has proved effective, and global financial markets have been regaining stability. Second, inventory adjustments have progressed markedly as a result of a substantial production cutback worldwide. And third, the effects of macroeconomic policies implemented aggressively around the globe have begun to appear.