Forbearance does not always lead to ‘zombification’ – BoE paper
Well-designed policies can support firms through temporary periods of stress, researchers find
Temporary debt forbearance is often criticised for keeping “zombie firms” alive, but this view is not necessarily accurate, research published by the Bank of England (BoE) finds.
The study focuses on Japan’s SME Financing Facilitation Act, launched in 2009 to help small and medium-sized enterprises weather the global financial crisis. The act allowed eligible firms to either defer interest payments or receive debt forgiveness.
Critics of such forbearance policies say they keep unproductive firms
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