But the most debatable issue is the imposition of new restrictions on temporary hires, especially if permanent hiring does not improve sufficiently. In the current conditions, with more than 4.5 million Spaniards unemployed, all job creation opportunities must be kept open and not in the least impaired until the new channels for permanent hiring prove effective. In short, the fiscal consolidation programme, the pension reform proposals and the labour market reform measures are three areas in which significant advances have been made by the authorities in the last few weeks, but in which much work remains to be done. Let me now move on to the area of reform which falls directly under the responsibility of the Banco de España, namely the restructuring of the financial system and, more specifically, of the savings bank sector, where there has been appreciable progress in recent weeks. In the last few months a very significant portion of Spanish savings banks has concluded merger agreements with other savings banks, in what is the largest restructuring of the Spanish banking sector in a long time. These movements started with the creation of the FROB (the Fund for the Orderly Restructuring of the Banking Sector) in June 2009, nearly two years into the international banking crisis affecting the markets and financial systems of all developed countries, and to which Spanish financial institutions were exhibiting a marked resilience that most have maintained to date. This new Fund responded to the need to downsize the Spanish banking sector, particularly the savings bank segment.

Specifically, it seeks to ensure that more funds are accumulated at banks to absorb losses, against a background of heightened uncertainty. In general, all Spanish banks that could legally suspend or postpone the dividends payable out of 2019 profits followed these recommendations. This will allow them to add around 50 basis points in 2020 to the capital buffers that they had before the outbreak of the pandemic. The positive effect of this measure supplements and is boosted by other decisions adopted by various economic authorities, which have reduced the capital requirements for banks (specifically, by releasing a large part of the macroprudential buffers, as mentioned above) and mitigated the impact of the pandemic on their income statements. 4  Moreover, the fact that the authorities’ recommendation has been extended to all banks in most jurisdictions, for the duration of the crisis (a measure that is, in any case, reversible through future extraordinary dividends should more benign scenarios materialise than those envisaged in the current circumstances), has limited the collateral effects of this measure on banks’ capacity to issue capital instruments at an appropriate cost. In fact, although banks’ cost of capital rose significantly after the emergence of the pandemic, following the implementation of the broad raft of measures to mitigate its impact, this increase has been fully corrected, without this recommendation having had an apparently significant impact, at least on most European banking systems. The ECB and the European Systemic Risk Board will review this recommendation before the end of the year.