It needs temporary stays on derivatives contracts so that counterparties don’t scramble for collateral at the onset of resolution. And it needs to be structured and governed well enough to withstand potential legal challenges and sustain market confidence. A proposal for “total loss-absorbing capacity”, or TLAC, was announced at the G20 Summit in Brisbane last year.
Such a development should positively impact economic confidence. With firmly anchored inflation expectations, the Central Bank is giving more weight to an accommodative monetary stance until a firm economic turnaround is established. However, should the outlook for inflation, growth, or financial stability change, we will take appropriate action.