This is a dilemma for the central bank because either choice will have negative effects. If the central bank, for example, adopts a monetary-tightening stance to fight inflation, then the short-term profitability of companies and financial institutions will deteriorate, which may blunt the momentum for restructuring.
Further progress will depend not only on banks’ continued efforts to improve their balance sheets and lending strategies, but, above all, on their ability to rise to the challenges posed by the digital revolution, adopt strategies based on higher investment in new technologies, reduce operating costs and restructure their distribution network.