The authorities can – and have – provided considerable temporary support, but in a market economy we cannot manage the financial sector or provide exceptional support indefinitely. Banks must rebuild their capital base. There are many ways to do so. The improved capital markets offer opportunities to raise funds including equity.
Profits earned should be used – as priority – to build capital and reserves, rather than to be paid out as dividends or undue compensation. Second, banks should lend, because the magnitude of public support has been provided for this purpose, and the strengthened balance sheets will allow them to lend. Banks should strive to maintain their supply of loans.