In any event, the evidence available in the coming months on the effective use of these capital buffers, once the losses stemming from the COVID-19 crisis materialise, will be essential to allow conclusions to be drawn on the effective use of these buffers and to assess whether any additional measures may be needed. Based on the experience obtained during this crisis, and on a medium-term horizon, the balance between structural and countercyclical capital buffers could also be analysed as a way of avoiding the difficulties I have mentioned, should they arise. Thirdly, I also wish to refer to the treatment of dividends during the crisis. As you are all well aware, one of the recommendations of the European prudential supervisors, which has also been made in many other countries, is that banks should refrain from distributing dividends and be highly prudent when paying bonuses to their staff. This measure seeks to ensure that, in this highly uncertain setting, banks are able to build up sufficient funds to absorb losses. In general, all Spanish banks that were legally able to suspend or defer dividends to be distributed out of 2019 income complied with these recommendations. This enabled them to increase in 2020 the capital buffers they had already built up before the onset of the pandemic.
Somewhat simplified, we can say that the money supply will once again become approximately proportional to the price level. A larger money supply in the future will lead, all else being equal, to a higher price level in the future. If the central bank could thus credibly commit to a permanent and lasting increase in the money supply, the expected future price level would rise. The problem here is, however, that there is no way for the central bank to make a credible commitment to a larger money supply in the future. There is nothing to prevent the central bank from reneging on such a commitment and reducing the money supply in the future in order to reduce future inflation and keep it in line with the inflation target. 16 Experience from Japan's period of "quantitative easing" also shows that the extreme expansion of approximately 70 per cent of the monetary base between March 2001 and March 2006 did not noticeably affect expectations of inflation and the future price level. 17 For example, the yen did not depreciate as it should otherwise have done. Firms and households clearly believed that the expansion of the monetary base was temporary and not permanent, which subsequently proved to be true. The monetary base fell back to normal levels when the interest rate was later raised to above zero. Other measures A number of other measures for addressing a situation with a zero interest rate have been proposed.