’ funding costs and of a deterioration in credit risk quality. with regard to financing, the gradual reduction in, and increased cost of, eurosystem liquidity facilities and the developments seen in deposits ( with depositors seeking better remunerated financial instruments and having used up part of the savings buffers built up during the pandemic ) may accelerate the increase in banks ’ cost of funding. the continuation and / or heightening of the recent tensions in the global banking sector could also contribute to this increase. as for the future increase in credit risk, our estimates show that a market interest rate increase of 400 bp, somewhat larger than the gain of approximately 365 bp seen in the 3month euribor, could push up non - financial corporations ’ median gross debt burden ratio by between 2. 9 pp and 6. 8 pp9 and the share of corporate debt held by firms under high financial pressure10 by between 6. 5 pp and 8. 9 pp. in the case of households, it is estimated that a 400 bp rise in the 12 - month euribor ( slightly less than the 410 bp increase seen since the beginning of 2022 ) would raise the percentage of indebted households with a high net interest burden11 by 3. 5 pp. this increase would tend to be stronger for lower - income indebted households, which are also those most affected by the rise in inflation. in this regard, the reform in late 2022 of the code of good banking practice ( cgp ) focuses precisely on orderly debt restructuring for household segments with a high degree of socio - economic vulnerability. the banco de espana will assess its implementation as more data become available. how different banks and financial systems position themselves against these risks will determine how resilient they are. in this regard, amid such high uncertainty, including that surrounding the degree of monetary policy tightening, spanish banks must implement a prudent provisioning and capital policy. a policy that earmarks part of the short - term increase in earnings to bolster the sector ’ s resilience would thus put it in a better position to absorb any potential losses should the worst risk scenarios materialise. from a european standpoint, it should also be noted that a smoother - functioning euro area with improved governance would contribute hugely to making the european financial system less vulnerable. in particular, the creation of a fully mutualised european deposit insurance scheme would boost the confidence of citizens and the markets and contribute to increased risk - sharing in the

have accumulated more debt as a result. further accumulation of debt might prove unsustainable for firms with a high level of indebtedness. here, public support in the form of temporary equity injections could be an option to explore, especially in the case of large companies where this option seems more feasible. the spanish government has already set up a public fund that can be used for that purpose. for other firms, direct grants could be considered. debt restructuring could be a beneficial option for both lenders and borrowers in the case of highly indebted firms with a viable business. to smooth this process, insolvency mechanisms should be improved to make them more efficient. in spain, these procedures tend to be very lengthy, taking an average of three - and - a - half years7, destroying company value in the process, and in many cases lead ultimately to the piecemeal liquidation of the firm. to prevent the congestion of courts, out - of - court settlements could be incentivised. and in the medium to longer term, resources devoted to specialised courts could be strengthened with the aim of speeding through the resolution of these processes. in the case of firms with no viable business model, an orderly exit from the market should be provided for. a prompt resolution of this process will benefit the structural adjustment of the economy and the reallocation of resources towards more productive firms. four, our goal should be to ensure that the present crisis neither gives rise to a widespread tightening of financial conditions nor causes serious damage to our financial system. in the context i have described of an uneven and uncertain recovery, we cannot rule out the possibility that the risks identified may materialise or that their impact and persistence may be greater than expected. in this sense, in the banking sphere, the response to the possible materialisation of these risks can only be at the european level, given the commitment to the banking union. in this response, the completion of banking union with the launch of a fully mutualized european garcia - posada, m. and r. vegas sanchez ( 2018 ) : “ bankruptcy reforms in the midst of the great recession : the spanish experience ”, international review of law and economics, 55, pp. 71 – 95. deposit insurance scheme would make a decisive contribution to ensuring financial stability in the euro area, in the coming months and in the medium term. it is also crucial to analyse how appropriate the european regulations for resolution and winding - up of credit institutions