Preferential tax treatment of interest expenses may have played a major role in boosting corporate borrowing to finance ever larger mergers and acquisitions as well as leveraged buy-outs. Likewise, generous tax deductions for mortgage interest payments, combined with public policy intervention to boost home ownership, may have contributed to a sharp growth in household debt in some countries.
Ladies and gentlemen, all these indicators point to a fundamentally sound banking system. Yet another strong buffer we have going for us is the country’s favorable external position. Among others, our first quarter 2008 balance of payments yielded a surplus of $ billion.