The message I wish to convey is that banks should persist with their early recognition policy, as this will enable them to continue to fulfil their task of providing funding to the economy. It is important that banks analyse situations individually, distinguishing between temporary and more permanent effects. Automatic reclassifications that result in excessively procyclical behaviour should be avoided. However, above all, banks must be prudent, assessing provisioning needs in accordance with plausible and conservative scenarios for the coming years. In short, especially should the crisis be prolonged, banks must ensure timely and proper recognition of the effective quality impairment of their credit exposures in compliance with the supervisory guidelines. Secondly, I wish to refer to the capital buffers built up and their use during this crisis. As I mentioned earlier, solvency levels are now significantly higher than in the run-up to the global financial crisis. At the start of this crisis, prudential supervisors decided to release many macroprudential buffers – the capital, countercyclical and systemic risk buffers – and, at the same time, the microprudential authority temporarily allowed banks to operate below the level set for certain structural requirements. These decisions sought to help banks continue to provide the financing that households and firms need in such an adverse environment as the present one. Our empirical analysis shows that the use of these buffers will enable banks to provide more funding to the real economy. This in turn has a positive impact on economic growth, encouraging its recovery or moderating its decline.
This entails assessing the solvency of the resulting institution, analysing the impact on overall financial stability and overseeing the execution of the merger to ensure that the potential synergies are indeed harnessed. Transnational European mergers would be particularly positive. They would deepen the Banking Union, reduce the sovereign-bank risk nexus, and provide greater potential for diversification. They would also help establish broader customer bases, so that the cost of investment in technology could be more widely distributed, although the immediate impact on cost-cutting would be more limited. In this respect, the ECB Guide on the supervisory approach to consolidation in the banking sector aims precisely to provide the market with greater predictability of supervisory actions, to help banks design merger plans that are sound from a prudential standpoint and ensure that the resulting institution has a business plan that, when executed correctly, will add value. However, banks should also seek to enhance their efficiency by improving the use they make of the information they hold. This requires significant investment in digitalisation and also the incorporation of new data processing technologies to allow them to change their business model while controlling their risk profile. And this is why it is so important that the “quick fix” has brought European prudential regulations on this kind of investment much closer in line with those already in place in the United States and Switzerland.