Likewise, as I have mentioned on numerous occasions since the onset of the pandemic, the financial vulnerability of some business segments has increased, especially in the activities hit hardest by the crisis and in smaller firms. In the case of households, the increase in the saving rate and the reduction in debt at aggregate level mask the existence of segments that have seen their financial fragility increase. These vulnerabilities could also lead to future rises in default rates. 7  The businesses benefiting from the guarantee programme had a lower equity-to-assets ratio, a higher average cost of debt, a lower level of sales productivity (measured as sales to employees) and shorter bank debt maturities (see Box 2.1, Financial Stability Report, Spring 2021). 8 See Box 2.2, Financial Stability Report, Spring 2021. 8  A second significant aspect is the heterogeneity in the impact of the crisis on the banking sector, stemming from the different starting positions in terms of solvency and balance sheet quality, but also from a heterogeneous exposure to the countries, sectors and firms most affected by the crisis. These differences are reflected in the mixed performance of profitability at banks in 2020. In particular, extraordinary factors aside, the impact of the crisis has widened the dispersion range of profitability among banks. The differences between banks appear to owe less to a differing exposure to the sectors hit hardest by the pandemic,9 which is relatively homogeneous, than to the dispersion in terms of exposure to SMEs.

4 Provisions had already increased by € billion between June 2019 and June 2020. 5 As a result of its merger with Bankia, in March 2021 CaixaBank recorded positive extraordinary results of € million € million in negative goodwill less € million in extraordinary expenses). 5  increase in profit in the first quarter was essentially explained by a significant reduction in provisioning, which stood at pre-pandemic levels. Fourth, the unfavourable profitability performance in 2020 did not translate into a worsening of the sector’s solvency. Quite the contrary: capital ratios increased. The reasons for this are: i) the aforementioned negative extraordinary factors on profitability affected balance sheet items that have no bearing on prudential solvency (for instance, goodwill); and ii) the authorities implemented various measures to shore up institutions’ CET1 ratio, most notably the European Union’s regulatory reform (“quick fix”) and, again, the public guarantee programme and the recommendation against paying dividends. Despite their heterogeneous initial solvency positions, banks performed favourably across the board in 2020. Moreover, as at December 2020, accounting capital and reserves constituted the main components of Spanish banks’ prudential capital, while deductions for goodwill lost relevance as compared with previous years owing to a significant share of this having been amortised. More recently, in 2021 Q1, Spanish banks’ solvency ratios held stable relative to December 2020. Short and medium-term risks In my view, this positive sector performance must not obscure some of the short, medium and long-term risks that still exist.