But the precautionary measure has served us well. We will continue to be vigilant in anticipating issues, and in taking proactive measures to strengthen the resilience of our system. With regards to the flow of credit from banks to corporations, we believe this is best facilitated through government schemes to co-share some of the risks with banks. In February, the Government announced the Special Risk-Sharing Initiative (SRI). Under this Initiative, the Government will absorb 75% of the risk for insurance covering working capital and trade-financing loan facilities. The Government will also absorb 80% of the risk for bridging loans which go towards meeting firms' working-capital needs. We also have schemes for SMEs and micro-loans. Apart from ensuring that the financial system continues to function effectively, the Government has, as in past periods of downturns, used fiscal measures to minimise the impact of the crisis. This involves targeted help for families and companies, while continuing to build capabilities to prepare for the upturn. This time, a creative Jobs Credit Scheme has been added to help companies keep their workers. Conclusion Ladies and Gentlemen, these are very challenging times. The global economy is in recession, and the financial system remains fragile. We need tough, decisive and forwardlooking actions in the core economies that are deeply affected. Asian economies have also been severely affected, and policy adjustments are necessary. However, the medium-term prospects for growth remain strong.
The mechanisms for mopping up the excess liquidity need to be put in place early. Meanwhile, the scale of fiscal stimulus, and funding needed to support this, has raised the spectre of destabilised sovereign bond markets and the crowding out of private borrowings. This does not bode well for private capital formation, and could create stresses downstream for corporations which do not have the advantage of sovereign backing. Further, if deficits are seen to be structural, market reaction could negate much of the effect of fiscal stimulus. There is also the issue of how to  BIS Review 30/2009  3  restore private-sector driven intermediation of credit in due course. While government support for businesses’ access to credit is necessary now, it cannot continue indefinitely. In other words, even as we take unconventional measures, we need to have an eye on medium-term sustainability, and make clear our "exit" strategy and timing. Just as we must not be behind the curve in taking action to stabilise markets, we need to anticipate what lies ahead and plan accordingly. This is crucial because that later-stage "exit" action represents not just the end of this phase but a crucial transition into another set of conditions with totally different policy demands. Third, we need to consider the global dimension of our responses, and the impact on other economies. For instance, the bank deposit guarantee scheme that first started in Ireland triggered a domino effect and made its way to this region.