Central banks have used monetary tools to ease the liquidity crisis of the financial sector; European institutions and national governments have used public resources both to help meet the SMEs’ short-term financing needs and to fund guarantee schemes so as to mitigate credit risk. Regulators have envisaged specific provisions for SMEs in revising and strengthening the rules on banks’ capital requirements.
Several things prompted us to review that approach, and one of them was a worry about the risks which we were incurring on behalf of taxpayers. What would happen if, despite our banking supervision, a bank were to get into difficulties?