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Fixing corporate balance sheets by rescheduling loan payments and converting debt to equity went a long way toward solving problems.
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No longer is it only company executives and their bankers that sit round a table rescheduling loans.
The banks, he said, should get much tougher, denying credit to nonviable companies so that they exit the market, while subjecting distressed companies to debt write-downs as opposed to rescheduling loans.
If a company is not generating significant profits and has no imminent prospects of doing so, creditors do not want to reschedule loan payments or swap debt for equity, Mr. Miller said.
For example, its member companies will refer people to free debt advice services, and will reschedule loan payments if customers cannot afford to pay them.
New rules on accounting for rescheduled loans may mean an extra €10 billion in provisions.
The repayment rate of rescheduled loans, known as flexible loans, is currently over 98percentt.
Yet securitisation has made it harder to reschedule loans and nobody knows how far house prices will fall.
One reason for the banks' rage was the failure of their plan to make their rescheduled loans senior to Marconi's bonds.
Grameen Bank routinely reschedules loans and at the time of rescheduling makes a 50percentt provision against the rescheduled amount, makes a 100percentt provision against the unrepaid amount at the end of the second year and writes off the entire balance of rescheduled loans at the end of the third year, even as repayment continues.
Brazil is facing its most serious market crisis in three years and urgently needs to bring in more foreign earnings to help it service $250 billion in public debt and allay market fears that it may have to reschedule loans or default on them.
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