{ "title": "Time For A Spring Cleaning: The Global Economy Will Thank You", "publication": "IMF Blog, February 25, 2013", "sourceUrl": "https://www.imf.org/en/blogs/articles/2013/02/25/time-for-a-spring-cleaning-the-global-economy-will-thank-you", "canonical": "https://www.imf.org/en/blogs/articles/2013/02/25/time-for-a-spring-cleaning-the-global-economy-will-thank-you", "overlayPath": "/en/blogs/articles/2013/02/25/time-for-a-spring-cleaning-the-global-economy-will-thank-you/index.md", "summary": "Author: José Viñals", "sections": [ { "heading": "Overview", "content": "- Author: José Viñals\n- Publication date: February 25, 2013\n- Central recommendation: Policymakers should de-clutter their to-do lists by focusing on three priorities—strong banks, strong regulation, and strong central banks—to support growth and improve financial and monetary stability in 2013 and beyond." }, { "heading": "Strong banks", "content": "- Findings\n - Financial institutions in advanced economies look healthier today, but the cleanup of the banking sector is not complete.\n - Weak banks are a drag on growth, particularly in Europe.\n - Non-performing loan ratios continue to rise in several countries in the euro area periphery and emerging economies in Europe amid high unemployment and anemic growth.\n - Some banks may need extra capital cushions to offset deterioration in loan quality.\n - Some banks may be beyond repair and must be restructured or wound down to prevent “zombie” banks that:\n - have little or no capacity to provide fresh loans to companies and households;\n - tend to avoid writing down bad loans, masking inevitable losses and creating “zombie” companies that are unviable in the longer term.\n- Policy recommendations\n - Weak banks in Europe should complete their spring cleaning this year to get the real economy back on track.\n - Cleanup requires a joint commitment by management, investors, regulators, and political leaders.\n - Direct recapitalization of weak euro area banks through the European Stability Mechanism should be a viable option in some cases." }, { "heading": "Strong regulation", "content": "- Findings\n - Progress has been made, but regulatory work remains incomplete.\n - The new international banking rules known as Basel III need to be implemented.\n - Significant differences across countries remain in banks’ calculations of basic Basel III metrics such as risk-weighted assets.\n - Wider use of central counterparties will increase transparency in the over-the-counter derivatives market and help make the financial system less risky.\n - Recent scandals involving complex derivatives suggest banks’ internal risk controls are often inadequate.\n - Some banks remain “too-important-to-fail” because of size, complexity, and interconnectedness.\n- Evidence and research\n - IMF research shows that larger, shock-absorbing capital and liquidity buffers contribute to lower financial stress and higher and more stable economic growth, particularly when buffers consist of high-quality capital and more liquid assets.\n- Policy recommendations\n - National authorities must implement Basel III capital and liquidity requirements and encourage an internationally consistent buildup of new capital and liquidity buffers to avoid regulatory arbitrage.\n - Reform of the market for derivatives must accelerate, including wider use of central counterparties.\n - Policymakers must remove moral hazard associated with “too-important-to-fail” institutions by establishing effective resolution regimes that allow unviable banks to die safely.\n - Financial centers should swiftly adopt resolution regimes; the United States and the United Kingdom have agreed to coordinate contingency plans for winding down failing cross-border banks.\n - Strengthen supervisors so they can enforce new rules fairly and effectively and address systemic risks.\n - Many national authorities will need to press ahead with implementation of new macroprudential policies and make national decisions on their institutional and operational aspects.\n - The IMF will support implementation by integrating macroprudential concepts into surveillance and technical assistance work." }, { "heading": "Strong central banks", "content": "- Findings\n - More than five years after the onset of the financial crisis, central bankers face the challenge of responding to changing demands while preserving credibility and confidence.\n - Public debate focuses on the effectiveness of monetary policy in a world of ultra-low interest rates, anemic growth, and high unemployment.\n - The focus on price stability—avoiding both inflation and deflation—remains the most appropriate goal of monetary policy.\n - Using increased inflation to address high public debt ratios is ineffective unless inflation shocks are large and unanticipated, and such a strategy risks pushing up real interest rates and imposing unacceptable costs; historical examples underscore the devastating impact of high inflation on economic growth and social stability.\n - Empirical evidence strongly suggests that central bank independence is associated with lower inflation.\n - Some commentators argue that extraordinary actions like quantitative easing may have undermined central bank independence, but there is little evidence to support this claim.\n- Policy recommendations\n - Preserve independent central banks with a mandate and tools to maintain price stability.\n - Reinforce commitment to price stability and independence even while modifying the traditional monetary policy toolkit.\n - Strong, independent central banks that deliver price stability will be well equipped to navigate the new policy environment." }, { "heading": "Perfecting the plan", "content": "- Conclusions\n - The three priorities—strong banks, strong regulation, and strong central banks—are “must-haves,” rather than “nice-to-haves.”\n - These priorities will support growth and significantly improve financial and monetary stability in the medium term.\n - Policymakers can muster the necessary resolve to stick to these priorities.\n\nSource: Time For A Spring Cleaning: The Global Economy Will Thank You — José Viñals, February 25, 2013.\n\n---\n\n Content in this bundle\n\n- Chapter 4: Changing Global Financial Structures: Can They Improve Economic Outcomes?\n - Chapter 4: Changing Global Financial Structures: Can They Improve Economic Outcomes? (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Chapter 4: Changing Global Financial Structures: Can They Improve Economic Outcomes? (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/wp-content/uploads/2011/03/jose-vinals.jpg\n- macroprudential policies\n\nSource: https://www.imf.org/en/blogs/articles/2013/02/25/time-for-a-spring-cleaning-the-global-economy-will-thank-you" } ], "bullets": [ "[Markdown version](/en/blogs/articles/2013/02/25/time-for-a-spring-cleaning-the-global-economy-will-thank-you/index.md)", "[Structured JSON version](/en/blogs/articles/2013/02/25/time-for-a-spring-cleaning-the-global-economy-will-thank-you/index.json)", "[Bundle manifest](/en/blogs/articles/2013/02/25/time-for-a-spring-cleaning-the-global-economy-will-thank-you/bundle-manifest.json)", "Authors: Jose-Vinals", "Published: February 25, 2013", "Author: José Viñals", "Publication date: February 25, 2013", "Central recommendation: Policymakers should de-clutter their to-do lists by focusing on three priorities—strong banks, strong regulation, and strong central banks—to support growth and improve financial and monetary stability in 2013 and beyond.", "Findings", "Policy recommendations", "Findings", "Evidence and research", "Policy recommendations", "Findings", "Policy recommendations", "Conclusions", "**Chapter 4: Changing Global Financial Structures: Can They Improve Economic Outcomes?**", "[https://www.imf.org/wp-content/uploads/2011/03/jose-vinals.jpg](https://www.imf.org/wp-content/uploads/2011/03/jose-vinals.jpg)", "[macroprudential policies](http://blogs.imf.org/2011/04/08/macroprudential-policy-filling-the-black-hole/)" ], "related": [ { "title": "Chapter 4: Changing Global Financial Structures: Can They Improve Economic Outcomes?", "role": "document", "sourceUrl": "http://www.imf.org/external/pubs/ft/gfsr/2012/02/pdf/c4.pdf", "summary": { "path": "/external/pubs/ft/gfsr/2012/02/pdf/c4.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/external/pubs/ft/gfsr/2012/02/pdf/c4.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/blogs/articles/2013/02/25/time-for-a-spring-cleaning-the-global-economy-will-thank-you/index.md", "json": "/en/blogs/articles/2013/02/25/time-for-a-spring-cleaning-the-global-economy-will-thank-you/index.json", "bundleManifest": "/en/blogs/articles/2013/02/25/time-for-a-spring-cleaning-the-global-economy-will-thank-you/bundle-manifest.json" }, "generatedAtUtc": "2026-08-28T03:11:42.692Z" }