In banking, and given the crucial role this sector has still to play, we supervisory authorities have continued to stress that the use of capital buffers by banks is appropriate for recognising credit impairment and to continue providing solvent credit to households and firms. Banks will have sufficient time to comply once more with their capital requirements, and the start of the process will never be before the main effects of the pandemic have dissipated. In parallel, given the uncertainty still in place, and the fact that the impact of the pandemic has not been fully manifest on bank balance sheets and that they continue to benefit from various public support measures, we have recommended that banks act with extreme prudence in dividend distribution policies. In tandem, banks must pursue a policy of early recognition of impairment losses, ensuring that this is appropriate and timely, as stipulated in supervisory guidelines. Fiscal policy support in this phase should focus on the firms and population groups most affected. One particularly important aspect is the support to viable firms which, in light of the scale and duration of the crisis, have seen their solvency worsen. Should such solvency problems materialise, they would not only prompt destruction of the productive system and employment, in firms that could be viable in the post-pandemic scenario; they might also ultimately affect the financial position of the banking sector, which might respond with lending restrictions that would feed back negatively into the prospect of recovery and economic growth in the medium term.
29.03.2021  The Spanish economy and the COVID-19 crisis: assessment, outlook and challenges Europa Press informative breakfast Pablo Hernández de Cos Governor  *English translation of the original speech in Spanish  Good morning, ladies and gentlemen. I would like to thank the organisers of this event for their kind invitation. I shall begin with a brief assessment of the period since the COVID-19 crisis broke. I shall then set out the Banco de España’s view on the outlook for the Spanish economy. Finally, I shall describe the medium-term economic policy challenges at the national and European level. Taking stock of a year of pandemic: an unprecedented, persistent and uneven impact COVID-19 has caused a global economic recession of an intensity which, in most geographical areas, is unprecedented. The crisis is, moreover, proving very persistent: as of today the pre-pandemic levels of activity have not yet resumed in most countries. Indeed, the successive waves of the pandemic have checked the recovery, particularly in the sectors most exposed to the restrictions. In Spain, this impact is particularly marked. GDP declined by 10.8% in 2020 as a whole, a slump appreciably greater than that in the euro area (-6.8%). At end-2020, Spanish GDP was still 8.9% below its pre-pandemic level, while this gap was 4.9 percentage points (pp) in the euro area. Several reasons account for this more pronounced impact in our country. One was the greater intensity of the pandemic initially, which led to harsher containment measures in spring last year.