First, the NPL ratio dropped from above 20 percent at end-2014 to almost 6 percent presently, making it the largest adjustment in the EU over a relatively short time period. At the core of this adjustment were conservative requirements for provisioning NPLs, our hands-on supervisory approach, and a fiscal facility that was conducive to the development of the secondary market for NPLs. Second, the share of leu-denominated loans in the total stock of loans has increased from one third prior to the crisis to two thirds nowadays, with the benefit of reducing contagion risk and improving the transmission mechanism of the monetary policy. However, it would be risky to press ahead too fast. In the case of the ECB, while the tapering of its QE has already started, an upward move in the interest rate is not likely to happen soon. As for peer countries such as Poland and Hungary, their macroeconomic conditions do not seem to 2/3  BIS central bankers' speeches  warrant a start of the tightening cycle this year either, with still below-target inflation. As long as real interest rates remain negative all over Europe, straying too far away from our regional peers in terms of policy rate would invite disproportionate appreciation pressures, which – while helpful in terms of inflation – would not be a welcome development, given Romania’s increasingly negative external imbalance.
First, because financial markets are so highly integrated, central banks need to cooperate closely in order to master the problems. Second, incentive schemes in banks that have given particular priority to rewards for risky behaviour should be changed, and the instruments for measuring risks need to be reassessed. The way in which the Swiss National Bank steers the Swiss franc money market, however, has proved its worth, with the three-month Libor being successfully held inside the target range. In this way, the real economy has been protected from the upheaval on the interbank market. BIS Review 31/2008  1