For a start, many banks should take advantage of the good times to continue cleaning up their balance sheets and adapt their business models to face upcoming challenges – the current economic environment is as good as it gets! All banks also need to further strengthen their risk management frameworks, IT systems and internal capital and liquidity management.
As a result, the continued monetary support from assets purchases is not only provided by the additional net asset purchases, but also by the sizeable stock of already acquired assets and the forthcoming reinvestments. The second key channel is the signalling channel: the expectations component of long-term yields reflects market expectations of the future path of the policy-controlled short-term interest rates.