As such, they may be just an implicit part of the dynamics of the business cycle. But neither are demonstrably in the best interests of the economy or the bank’s shareholders. They lead to an unnecessary degree of volatility in earnings and, as such, to a reduced long-term capitalized value of the bank. This, in turn, lessens the effectiveness of financial intermediation.
As a Central Bank, we also have a strong interest in promoting the work of the ICIEC. As a regulator of banks, and the financial sector more generally, the CBB aims to encourage the adoption of high standards of risk management throughout the sector.