Notes: Net percentages are defined as the difference between the sum of the percentage of banks responding “tightened considerably” and “tightened somewhat” and the sum of the percentage of banks responding “eased somewhat” and “eased considerably”. The net percentages for responses to questions related to contributing factors are defined as the difference between the percentage of banks reporting that the given factor contributed to a tightening and the percentage reporting that it contributed to an easing. “Cost of funds and balance sheet constraints” is the unweighted average of “costs related to capital position”, “access to market financing” and “liquidity position”; “risk perceptions” is the unweighted average of “general economic situation and outlook”, “industry or firm-specific situation and outlook/borrower’s creditworthiness” and “risk related to the collateral demanded”; “competition” is the unweighted average of “competition from other banks”, “competition from non-banks” and “competition from market financing”. The latest observations are for Q1 2020. Our monetary policy measures, together with the contribution from the announcement of public credit guarantees in many countries and other direct and indirect support for firms and households, are contributing to the protection of bank-based credit flows. Banks have indicated that TLTRO III is having a net easing impact on the terms and conditions offered to borrowers and a positive net impact on their lending volumes, particularly on their expected lending volumes over the next six months (Chart 17).

In terms of quarterly performance, a significant rebound is expected over the summer in line with the removal of the most severe lockdown measures. However, the scenarios differ in terms of the duration and severity of virus-related restrictions on economic activity and the behaviour of households and firms in the rest of 2020 and throughout 2021. In all scenarios, a deep recession is envisaged: in the severe scenario, real GDP would fall by 12 percent in 2020. Chart 1 Euro area real GDP under the mild, medium and severe scenarios  https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp200519~e5203d3520.en.html  1/14  5/19/2020  Pandemic central banking: the monetary stance, market stabilisation and liquidity  (index, 2019 Q4 = 100)  Source: ECB calculations. Note: For details on the scenarios, see Battistini, N. and Stoevsky, G (2020), “Alternative scenarios for the impact of the COVID-19 pandemic on economic activity in the euro area”, Economic Bulletin, Issue 3, European Central Bank. Chart 2 shows the household savings rate, as projected in the European Commission Spring Forecast that was published a couple of weeks ago. The household savings rate is forecast to jump by a remarkable 6 percentage points to around 19 percent for 2020, and is expected to remain elevated even in 2021. Although “forced saving” during the lockdown is surely contributing to the increase in household saving, it is plausible that the precautionary motive will remain significant so long as virus-related uncertainty persists. Elevated uncertainty may also hamper investment prospects for an extended period of time.