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Here’s a little circle that seems to need squaring. Banks, pushed by regulators busy trying to avoid a repeat of the last credit crisis, have begun accounting for credit losses on the basis of what might be expected over the entire life of loans.
But now, in the middle of another crisis, regulators are telling banks that they should not be kitchen-sinking credit loss reserves for fear of cutting off the flow of credit to economies that desperately need all the help they can get.
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Paul Donofrio, |
The problem is that you can’t do one without doing the other.
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