They increase their capital ratios by retaining their earnings, holding off lending and avoiding additional risks. Small and medium-sized firms in peripheral countries are particularly affected by the sustained shortage in credit supply. BIS central bankers’ speeches  1  Key factors for success The comprehensive assessment should contribute substantially to breaking this negative causal chain.
It is not the only factor needed for reviving the loan business, particularly in the peripheral countries. But it is one of the important ones. Restored confidence in the euro area banking sector should lead to lower funding costs for banks, which should be able to shift their focus back to their core business: lending to firms and households.