So far there has been little sign of significant deterioration in these areas. But as you know, bad debts are a lagging indicator of the state of the economy. The most reasonable assumption is that bad debt provisions and charge-offs will increase, though we do not yet know to what extent. •  Provisions may also increase as a result of a decline in property prices and collateral values caused by SARS. The value of bank premises may also be affected. Some of these effects may prove to be short-lived. Others may take longer to emerge, as in the case of the impact on asset quality. The overall impact on earnings is thus difficult to quantify. As of now, and assuming that the SARS problem does not drag on for too long, most banks seem to think that the adverse effect on profits will not be too severe. It bears repeating that the balance sheets of the banks remain strong. We have updated our stress tests to take account of the SARS outbreak, and these continue to show that the banks can withstand a great deal of pressure from a variety of sources. We do not expect that this will actually be put to the test in practice, but it is comforting to know that the banks are more than adequately capitalised in case of need. What can the banks do to limit the potential downside risk from SARS?
It is important that banks adopt a consistent approach to dealing with restructuring requests across the organisation and provide ready access for customers in difficulties to approach the bank to discuss relief. Working together, banks and their customers can help one another to deal with the effects of  BIS Review 21/2003  3  SARs and position themselves for recovery. I am confident that the banks have been taking the right action, and will continue to do so. 4  BIS Review 21/2003