other assistance. the exercise of parate execution powers has been debated and questioned in various fora over the years and now, a need has arisen to examine whether there are other alternative routes to debt recovery. it has also become necessary to evaluate whether the exercise of parate powers by commercial banks has achieved its objectives. according to banks and financial institutions, the very threat of parate action and publicity prompt defaulters to pay the debt. after fourteen years of the application of the debt recovery laws, it is therefore, fitting that an objective assessment be made to the recovery of debts through this legislation. the moderate development in the sri lankan economy in the past decade, saw a heavy demand for credit and the expansion of loan portfolios of banks. as banking is known to be a risky business, the monies placed on trust by depositors have to be prudently invested, but with a firm commitment to return funds to depositors when they call for it. in the circumstances, banks are duty bound to ensure the safety and soundness of their institutions by prudently deploying funds they mobilize. loan defaults and non - performing advances are quite common in our part of the world. they have contributed to the maintenance of high interest spreads which in turn translate into high lending rates as banks tend to cover the cost of carrying large volumes of non - performing loans in their balance sheets. the cost of non - performing advances is therefore a charge on profits by way of provision to be made for these losses. banks lose out on interest income that is rightfully theirs. effectively therefore, the good borrowers pay the price for defaulting borrowers. 1 / 2 i am aware that banks have their own methodologies to evaluate risks when granting loans and advances and recently, they have been adopting modern methods of credit risk mitigating techniques based on the basle principles. to begin with, the lack of adequate knowledge of the industry, poor credit assessment skills and ineffective follow - up and supervision of loans are the key to non - recovery of debt. a banker who lends only against collateral without looking at the viability of the project is obviously imprudent. sometimes, banks are not familiar with the industry to which a loan is granted - it is imperative that they are conversant with yields, markets and prices to be able to assess the viability of the project. in others, follow - up and monitoring is virtually non - existent. the close monitoring of a project during the

have remained well above the levels seen at the start of this year. chart 5 euro area real and nominal rates 11 / 19 source : bloomberg. so we should not hesitate to increase the volume of purchases and to spend the entire pepp envelope or more if needed. in this way, we can prevent a tightening of financing conditions which would otherwise lead to inflation remaining below our aim for longer. eventually, firm commitment to steering the euro area yield curve may allow us to slow the pace of our purchases. but in order to reach that point, we must establish the credibility of our strategy by demonstrating that unwarranted tightening will not be tolerated. 12 / 19 from policy fatalism to policy coordination we should be confident about what we can achieve. it is sometimes claimed that monetary policy may be ineffective against global disinflationary forces or can only raise inflation at the cost of intolerable side effects, and that as a result it should not push too hard to achieve its goal and instead extend its policy horizon far into the future. but counterfactual analysis shows that after the financial crisis and during the covid - 19 shock the ecb ’ s expansionary policies have been highly effective. without our policies, inflation and gdp growth would have been dramatically lower and many more people would have lost their jobs. in fact, it is failure to make full use of monetary policy in the face of falling demand and inflation expectations – rather than its supposed lack of effectiveness – that would trap us in an environment of low inflation, subdued growth and high unemployment. preserving favourable financing conditions will have a powerful effect on demand and inflation. however, given the fall of the natural rate of interest, [ 14 ] monetary policy is more effective if deployed in sync with other policies. monetary, fiscal and structural policies must reinforce each other in order to cut slack and close the gap between saving and investment. so far, europe has taken the right direction. ngeu provides us with an opportunity, for the first time ever, to achieve genuine european fiscal stabilisation backed by common debt issuance. 13 / 19 the ecb will continue net purchases under the pepp until at least the end of march 2022. moreover, we expect net purchases under our asset purchase programme to continue and policy rates to stay at present or lower levels until inflation has robustly converged to our aim and this has been consistently reflected in underlying inflation dynamics. the commitment to preserve favourable financing conditions for a lengthy period sends a clear signal