Otherwise, they may continue to roll over legacy loans, thus restricting the resources available for new lending in support of the real economy – so-called “ever-greening”.3 This risk is being countered through the ECB’s on-going comprehensive assessment of banks’ balance sheets – consisting of the asset quality review and a stress test – which will be  2  The existence of a “portfolio balance channel” has been extensively discussed recently in the context of the Fed’s large scale asset purchases.
All of them can result in serious economic problems if unattended. In Bosnia and Herzegovina, as you all know, we have a currency board regime. We do not have independent monetary policy, nor can we use nominal exchange rate as a policy tool. If action is needed, we must rely on fiscal policy or use flexible labor markets to bring about the necessary adjustment.