It is in part for this reason that we early on placed a great deal of emphasis on a timely comprehensive assessment of bank balance sheets, in the context of the creation of the Single Supervisory Mechanism. Frontloading bank balance sheet adjustment addresses capital constraints on credit supply.
Only banks that have fully accounted for legacy losses  BIS central bankers’ speeches  5  and hold sufficient equity can take on risk again and therefore originate and price loans in normal conditions. The comprehensive assessment, while still ongoing, has already had a catalytic effect on asset revaluation and provisioning and on capital raising.