The ECB has also made its liquidity provision facilities more accessible to the banking sector, in terms both of cost and volume, and it has relaxed the requirements made of assets pledged as collateral, in order to smooth financing to households, firms and the self-employed. All these measures have been effective in alleviating the financial tensions generated by the crisis. These tensions took the form of a strong rise in sovereign and corporate debt yields, which were then largely reversed. The ECB’s action has also helped keep bank lending flows 5  to companies notably robust in recent months and contributed to their cost holding at low levels. Also crucial for these dynamics have been the government-implemented public guarantee programmes for bank lending. The ECB measures have further provided considerable room for manoeuvre for national authorities. In this second phase of the crisis, in which the recovery in economic activity is, as I said, incomplete, fragile and uneven across sectors in countries, actual inflation and inflation expectations are holding at very low levels. And it is to be expected in the medium term that the weakness of demand will continue exerting downward pressure on prices. Against this background, on the ECB Governing Council we have made it clear that a high degree of monetary accommodation is needed to support the recovery and safeguard our price stability objective. Specifically, we have reiterated our commitment to do what it takes to support the euro area economy in these extremely difficult circumstances.
That includes ensuring that the common monetary policy is properly transmitted to all sectors of the economy and to all countries, and to prevent the financial fragmentation of the area. We also stand ready to adapt all our instruments should it be necessary. Naturally, we must also remain vigilant regarding the risks to financial stability. Evidently, the banking sector is facing this crisis from a healthier position than in the previous recession, which highlights the importance of the far-reaching changes made in this sector over the past decade. The ECB has also taken resolute action here. Among other measures, it has allowed banks to use the capital buffers available, which were created precisely for situations such as the present one. But, undoubtedly, the crisis will significantly impact the quality of banks’ credit portfolios, on a scale that will depend on its ultimate severity and which will be uneven across banks. The outcome will depend on banks’ starting position, on their business model and on the distribution of their exposures to the sectors and regions most affected by the pandemic. Accordingly, we supervisors must continue to closely monitor the risks to financial stability and we must be ready to provide a forceful, panEuropean response should such risks materialise. In short, European and national economic authorities must share the objective of preventing the current crisis from being accompanied by an across-the-board tightening of financing conditions or from seriously harming the stability of the financial system.