Monetary policy works not only by setting the policy rate, but by conveying expectations to the markets about the future course of monetary policy. This may be done intentionally or unintentionally, but markets will make their own attempt to assess the future direction of policy and will try to glean whatever they can from policy statements, speeches of policy committee members, and so forth.
These have been incorporated into the Guidance as the standard for NPL management going forward. A central principle of the Guidance is ‘tone from the top’. The resolution of non-performing loans rests firmly with the institutions themselves. Management bodies must take full ownership of this problem. This includes the development, and approval of a strategy and operational plan to deliver the progress required.