The use of the buffers may pose difficulties in two instances: for example, if banks fear that reaching certain capital ratios may be penalised on financial markets (the stigma effect); or if there are doubts over their reconstruction in the wake of the crisis, in particular at a time at which banks’ earnings-generating capacity is modest or at which the markets may not be overly receptive. To mitigate this problem, we have made it clear that institutions will have sufficient time to restore compliance with capital requirements and that this process will not start before the main effects of the pandemic have dissipated. In any event, over the coming months we must continue to monitor the use of these capital buffers and assess, where applicable, the adoption of additional buffer-related measures. Based on the experience from this crisis, and looking ahead to the medium term, the balance between structural and cyclical capital buffers could also be analysed as a means of avoiding future difficulties in banks’ effective capital buffer use. Our recent decisions limiting the distribution of dividends by banks should be understood in this very context. Given the persisting uncertainty over the economic impact of the pandemic, as supervisors we have recommended that institutions exercise extreme prudence and consider refraining from distributing cash dividends and conducting share buy-backs, or that they limit such actions until 30 September 2021.
The fiscal policy applied during the three first quarters of the year materialised in the annual fall of public spending for this period, whereas income growth was low and budget deficit was in check. On the other hand, the fourth quarter of 2012 and year 2013 are expected to be characterised by upward fiscal spending and budget deficit. This fiscal policy increases the macroeconomic stimulus in the short run; however, it should be sensitive to the need for medium and long-term stability of the public debt. BIS central bankers’ speeches  1  Foreign demand was the main driver of economic activity in the third quarter of the year. Latest foreign trade data confirm the same trend for the successive period. Thus, in October, the trade deficit continued the corrective trend, narrowing down to 10.3% in annual terms. Its performance has reflected mainly the good performance of exports, which maintained positive rates of their annual growth, 12.0% in this month. Imports have also contributed to narrowing the trade deficit, contacting 2.3% in annual terms, in this month. The analysis of monetary indicators points to low monetary pressures on prices. Higher money supply, the M3 aggregate, continued to decelerate in October, settling at 6.2%. In particular, lending to the private sector slowed down significantly. Annual credit growth for the private sector was 2.4% in October, reaching its all-time low. To a large extent, it is influenced by the low demand of households and business for loans, as reflected by the performance of consumption and private investments.