Also, the independent asset management company managed to limit the losses on the troubled assets they took over from the Swedish banks. Something similar seems to be occurring right now in the UK. The British also applied the good bank-bad bank model in the restructuring of Northern Rock. While the good part of that bank is still in the red, the bad part looks likely to return to making a profit already this year! So even though it is very difficult to assess all the direct and indirect effects of one particular solution in relation to another, those examples at least indicate that you can achieve better outcomes by acting economically savvy. But following the principle of being economically savvy is important not only because recklessly spending taxpayers’ money is irresponsible. It also serves other functions. One is combating moral hazard. Some people see the injection of state money as undue intervention, and look on it as a sign that you are abandoning the mechanism of private markets. Quite frankly, it signifies the opposite. To preserve the discipline in markets, it is important that shareholders and creditors are not allowed to walk away from a failure without suffering economic damage. So, did investors and creditors suffer their fair share of the losses during the recent crisis? Unfortunately, my answer is “no”. In many of the recent banking failures around the world, incumbent shareholders have maintained their ownership stakes or even remained in control of the bank. Creditors have enjoyed explicit or implicit guarantees.
For  BIS Review 36/2010  11  instance, the Committee thought that the chance that inflation would be 2% or higher in 2011Q1 was between 15% and 20%. We can once again use the February forecast to highlight a few of the key messages that the MPC wanted to communicate. In the early part of the forecast period, the probability of inflation being above the target is very high. This is because the data for inflation are well above target at present, and also because the fan chart here is relatively narrow. But the projection for inflation falls over the forecast period. This implies a fall in the probability of inflation being above target. Towards the final part of the projection, the probability of inflation being above the target rises back to being broadly one half. This chart emphasises that, in spite of the most likely outcome for inflation being below target, the nature of the distribution of risks implies that the probability of exceeding the target is about one in two. We can also combine the usual top-down fan chart with the information in the cross-sectional densities to produce a 3D fan chart [Slide 20]. The particular advantage of this chart is that it shows how the overall density changes over time. For instance, when the distribution is very narrow, such as at the start of the forecast period, the probability density at the centre of the fan is higher, simply because the MPC is more confident about its central forecast here.