At the same time, the interaction between monetary policy and financial stability becomes more relevant as heightened financial complexity amplifies the widespread non-linearities in the dynamics of financial and economic variables and the consequences of interconnections between the financial and the real side of the economy. In these conditions, the risk of systemic crises increases.
And although we hope that most situations could be resolved voluntarily, it is important to recognize that, under certain conditions, an orderly standstill (a temporary suspension of debt-service payments) may be appropriate to give a distressed debtor country some breathing space in which to take steps to address its problems. Broad international consensus on limits to official lending and on standstills is still lacking.