OTableR/anno/en_16_wb.html

FIGURE 2.10 Sequencing of the Sovereign-Bank Nexus——Selected Stylized Features and\nKey Financial Sector Policy Implications

<table>
 <thead>
  <tr>
   <th>
   </th>
   <th>
    ACCUMULATION
   </th>
   <th>
    DETERIORATION
   </th>
   <th>
    CRISIS
   </th>
  </tr>
 </thead>
 <tbody>
  <tr>
   <td>
    Stylized
    <br>
    features
   </td>
   <td>
    · Building fiscal pressures
    <br>
    and higher deficits
    <br>
    · Tightening financial
    <br>
    conditions for both the
    <br>
    public and financial
    <br>
    Retrenchment of foreign
    <br>
    investors
    <br>
    · Public debt accumulation
    <br>
    by domestic banks,
    <br>
    supported by moral suasion
   </td>
   <td>
    · Unsustainabe fiscal policies
    <br>
    and rising expectations of
    <br>
    sovereign default
    <br>
    · Erosion of fiscaland monetary
    <br>
    policy space
    <br>
    · Erosion of credibility of
    <br>
    government backstops and
    <br>
    guarantees
    <br>
    · Sharp decline in external
    <br>
    conditions, with reduced
    <br>
    market access
    <br>
    · Acute liquidity and solvency
    <br>
    challengesfor the financial sector
   </td>
   <td>
    · Resolution of uncertainty
    <br>
    around debt sustainability
    <br>
    challenges
    <br>
    · Recognition and allocation
    <br>
    of losses in the financial
    <br>
    sector
    <br>
    · Policy measures
    <br>
    to mitigate the
    <br>
    socioeconomic fallout
    <br>
    · Potential external support
    <br>
    from international financial
    <br>
    institutions
   </td>
  </tr>
  <tr>
   <td>
    Key
    <br>
    financial
    <br>
    sector
    <br>
    policy
    <br>
    implications
   </td>
   <td>
    · Consider topping up
    <br>
    international standards
    <br>
    for sovereign exposures
    <br>
    (counterparty risk)
    <br>
    · Ensure effective
    <br>
    governance and
    <br>
    operational independence
    <br>
    of authorities
    <br>
    · Diversify domestic
    <br>
    financial intermediation
   </td>
   <td>
    Where domestic debt
    <br>
    restructuring isconsidered
    <br>
    · Consider financial stability
    <br>
    implications alongside direct
    <br>
    fiscal benefits
    <br>
    · Coordinate among key public
    <br>
    stakeholders
   </td>
   <td>
    · Implement institutional
    <br>
    set-up fostering credible
    <br>
    objective setting and
    <br>
    decisive actions
    <br>
    · Establish effective and
    <br>
    operational financial safety
    <br>
    nets
    <br>
    · Perform swift viability
    <br>
    assessments informing
    <br>
    priorities
   </td>
  </tr>
 </tbody>
</table>