Doing away with sovereign debt as a cluster risk would also pave the way for the orderly restructuring of sovereign debt. If necessary, an orderly restructuring would be possible without endangering the stability of the overall financial system – and this would be good not only for euro-area countries but for other countries, too.
Besides, the outbreak of the Asian financial crisis alerted the regulators to pay high attention to the issue of cutting down non-performing loans (NPLs). By now, the NPL ratio of China’s state-owned commercial banks has decreased by nearly 50 percent from that recorded in the Crisis period.