Today, as some central banks contemplate shifting gears, it will be critical to understand how uncertainty is factored into monetary policy decisions if you want to understand and anticipate policy actions. In my remarks this evening, I will dig into this set of issues in the context of Bank of Canada policy.
But to do deep surgery such as restructuring or writing down loans, the bank has to recognize it has a problem – classify the asset as a Non Performing Asset (NPA). Think therefore of the NPA classification as an anesthetic that allows the bank to perform extensive necessary surgery to set the project back on its feet.