While some degree of forbearance may be unavoidable and even appropriate under the right conditions, it is at best a temporary measure. It is critical that forbearance not become institutionalized,  2  BIS Review 10/2001  but be tied directly to actions by both bankers and supervisors to address underlying problems. •  Governments are not good long-term asset managers. Prolonged government holding of impaired assets is not likely to enhance their value, nor aid in the restoration of market liquidity. •  Governments are not good commercial bankers. Delayed privatization of nationalized banks always means higher future costs, and usually inhibits fundamental reform. •  Government-directed lending means future fiscal losses. Similarly, efforts to stimulate credit growth by nonmarket forces in the context of a banking crisis at best buy additional time, and usually dig a deeper hole. •  Foreign investment in domestic financial sectors can yield important benefits. Foreign direct investment in the banking sector can provide much-needed capital resources, technology and knowledge transfer, and a more diversified capital and funding base in the event of future economic instability. •  Financial sectors are only as healthy as their borrowers. Without corresponding corporate sector restructuring, financial sector rescue efforts are likely to be necessary in the future. •  Strong financial systems depend on a reliable and credible legal system. In the absence of a strong legal system, borrowers lack appropriate incentives to repay. •  There are no "quick fixes" to financial sector problems.
A full and consistent implementation of the euro area’s existing fiscal and macroeconomic surveillance  2  BIS central bankers’ speeches  framework is key to bringing down high public debt ratios, to raising potential growth and to increasing the euro area’s resilience to shocks. We are now at your disposal for questions. BIS central bankers’ speeches  3