We must constantly keep a close eye on risk factors concerning the financial system, such as borrowers’ debt service capacity, and cooperate with the government to come up with appropriate response measures. We need to deal proactively with changes in the payment and settlement environment.
For example, when a central bank reduces the policy repo rate with the intention to support aggregate demand in the economy, the expectation is that there would be a reduction in the banks’ cost of funds and lending rates, and in the spectrum of market interest rates (and vice versa when the policy rate is increased).