those that were closer to their regulatory buffers. in addition, the ecb has published analysis that evaluates the link between headroom and lending across banks under their supervision. 18 it shows that firms ’ lending and capital management choices varied during the pandemic based on their proximity to their buffer requirements. with their granular data, the ecb were also able to show that this remained the case when controlling for credit demand from borrowers. in particular, banks with less headroom to regulatory requirements lent less to non - financial companies in the euro area during the pandemic. these results suggest that firms which were closer to their regulatory buffers were more likely to constrain lending during the covid stress. the implication must be that they did not act as if regulatory buffers were practically usable. the effect of headroom in the uk turning to the analysis the bank team carried out on uk data. the team used data on 158 pra - regulated firms and separated them into two groups : those with low and high pre - pandemic headroom. their approach 17 two regressions were used here : one looking at how the cumulative change in bank loans relative to q1 2019 depended on headroom while controlling for country - time and bank fixed effects ; the other looking at quarterly lending growth in relation to capital headroom in the preceding quarter. table 5, basel report on “ early lessons from the covid - 19 pandemic on the basel reforms ”. 18 see section 5. 1 of the ecb may 2021 financial stability review all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice was to compare how these two groups of firms behaved to understand whether headroom was a factor in different behaviour. 19 in absolute terms, capital surpluses increased by similar amounts for both of these groups – by about 1 percentage point of risk - weighted assets on average. however, for low surplus banks, this amounted to growth of over 80 % compared to pre - covid surplus levels, and only around 30 % for high surplus banks ( chart 4 ). this additional capital could have supported more lending. the team ’ s analysis shows lower lending growth for low headroom firms on average, though statistical significance across specifications is mixed. they analyse possible effects on mortgage lending, credit card lending and non - government guaranteed corporate lending separately. 20 they find statistically significant evidence that low surplus banks constrained nonguarant

bank of japan ’ s august report of recent economic and financial developments bank of japan communication, xx / 8 / 98. the bank ’ s view1 japan ’ s economic conditions continue to deteriorate. with respect to final demand, public investment seems to have bottomed out. net exports have resumed to increase mainly due to a decline in imports. however, business fixed investment has been decreasing significantly, and housing investment has weakened further. private consumption has not yet shown a resumption. against this background of weak final demand, substantial production cutbacks continue. as a result, inventories have decreased somewhat, but the level is still high. with the decline in expenditure and production, corporate profits continue to decrease, and employee income remains below the previous year ’ s level. in addition, the ratio of job offers to applications has dropped to a historically low level, and the unemployment rate has increased further. as a whole, employment and income conditions have worsened. although the above indicates a continued negative interactions of production, income, and expenditure, a further deterioration in the economy is expected to cease gradually from the effects of the comprehensive economic stimulus package including additional public works and the special income tax reduction. given the current considerably low level of economic activities, however, the positive influence of the package on private demand will likely be limited, and the economy ’ s immediate transition to a self - sustained recovery is hardly expected. in these circumstances, the relevant bills have been submitted to the diet to rebuild the stability of the financial system. moreover, the new administration is planning to launch new economic stimulus measures, including additional public investment in the supplementary budget for fiscal 1998 and the reduction in personal income taxes and corporate taxes. the materialization of these policies along with their effects on corporate and household sentiment should be carefully monitored. with regard to prices, wholesale prices are on a downtrend, and consumer prices ( excluding the effects of institutional changes2 ) remain below the previous year ’ s level. with respect to the factors affecting the outlook, the downward pressure on domestic prices induced by the decline in import prices is weakening. in addition, the expansion in the output gap in the economy is expected to slow in line with the implementation of the comprehensive economic stimulus package. nevertheless, reflecting the present large output gap, the downward pressure from domestic factors is unlikely to weaken considerably, and hence, prices are likely to be weak for some time. as for financial markets, yields on long - term government bonds and stock prices rose toward mid