Secondly, it is clear from the Irish experience is that no single measure will resolve NPLs. Supervisors cannot solve it all alone. What has helped Ireland is the combination of factors: including NAMA, increasingly intrusive and prescriptive supervisory measures, and some legal initiatives. The interplay with economic recovery is obviously hugely important also.
Indeed, assessing the macroeconomic risks to output and inflation in such circumstances remains among the most difficult challenges faced by monetary policymakers. Furthermore, a central bank may well be able to employ nonmonetary tools – such as liquidity provision – to help alleviate the adverse impact from financial disruptions.