Faced with an ample supply of relatively low-risk, high return government paper, banks and other financial institutions have had little incentive to engage in – or develop the capacity for – lending and equity finance for the private sector. The debt-interest rate and price dynamics of the past has fostered a short-term perspective among both savers and lending institutions.
And one consequence has been very limited access by small and medium-sized enterprises to credit. 3. Mr. Chairman, in the current regime of macroeconomic stability, banks are in a position to efficiently play their primary role as financial intermediaries in the economic growth process, channeling funds from savers to borrowers for investment.