In the view of the BIS, “Given the swings of mood in these markets, the authorities might at certain times find it relatively easy and inexpensive to lock in longer-term foreign currency loans for later use. Finally, countries might then make use of the recently announced Contingent Credit Lines offered by the IMF.
2 Indeed, even though income diversification tends to increase profits, and that strong and profitable banks are better able to absorb losses and thus strengthen financial stability, this strategy at the same time can increase financial stability risks as the increasing reliance on non-interest income sources entails a higher exposure of banks to the major global risks, and in particular those related to capital markets.