The final decision will take into account the macrofinancial situation at the time. That said, irrespective of the decision adopted, the recommendation for prudence in this area must remain in force as long as the current uncertainty persists and until a solid economic recovery takes hold. Recognition of the increase in credit risk  Third, I would also like to refer to the increase in credit risk generated by the pandemic in lending to households and firms and its recognition by banks. In this connection, national and international organisations1 have issued various statements to clarify the effects of COVID-19 on financial reporting by banks, in many cases providing greater flexibility to the regulatory framework and the prudential impact of such reporting. The measures focus on clarifying the existing accounting regulations for an appropriate calculation of credit risk impairment of financial assets in 2020, distinguishing temporary from permanent effects and recognising the role of public measures in sustaining lending. 1  Banco de España, ECB, European Banking Authority (EBA), European Securities Markets Authority (ESMA) and the Committee of European Auditing Oversight Bodies (CEAOB). 5  The aim of these measures is to prevent provisions from behaving excessively procyclically and mechanically as a result of automatic reclassification to non-performing of exposures affected by temporary shocks. That is to say, they seek to avoid a downward adjustment to the volume of credit in response to the COVID-19 crisis, and also to moderate the impact on profitability.

Naturally, such processes are the responsibility of banks’ owners, while our role, as banking supervisors, is to analyse any merger plans submitted to us from the standpoint of business viability. 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. In this setting, transnational European mergers would be particularly positive. They would facilitate further deepening of the banking union and provide greater potential for diversification. They would also help establish broader customer bases, so that the cost of the investment in technology could be more widely distributed, although the immediate impact on cost-cutting would be lower. In this respect, I wish to highlight the transparency exercise undertaken by the ECB in submitting its Guide on the supervisory approach to consolidation in the banking sector to public consultation prior to its approval. This Guide aims precisely to provide the market with greater forward visibility on 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, institutions 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 that will allow them to change their business model while controlling their risk profile.