In order to ensure an adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential that the fragmentation of euro area credit markets declines further and that the resilience of banks is strengthened where needed. The ECB’s comprehensive assessment before it adopts its supervisory role under the single supervisory mechanism will further support this confidence-building process.
Sometimes moral suasion will be sufficient - simply by calling attention to the potential consequences of withholding payments or credit, private parties may be persuaded that avoiding such an outcome is in their self-interest. But central banks must be careful that moral suasion is not perceived as coercion or an implied promise of official indemnification for private losses.