. targeting can also include tilting ﬁscal measures away from liquidity and towards solvency support, as this would alleviate debt sustainability issues. frameworks to assess corporate debt sustainability, including the exposure to interest rate risk, will become increasingly important. collecting and sharing data as exempliﬁed by the esrb working group can be key elements in monitoring debt sustainability. enhancing transparency : many standard solvency indicators are currently misleading, making it hard to assess the degree of delayed debt restructuring. banks ’ balance sheet information is heavily affected by credit guarantees, moratoria and regulatory measures. timely and prudent recognition of credit risk is thus necessary. timing : phasing out support measures needs careful timing in order to avoid cliff effects from a sudden and simultaneous withdrawal. there are important trade - offs to be considered. while withdrawing support too early can lead to cliff effects, maintaining it for too long can be ﬁscally costly and delay structural change. managing these trade - offs requires access to timely and reliable information on the state of the economy and the effects of policy measures. coordination : coordinating policies will become harder over time because the effects of the pandemic on economies and the policy responses increasingly differ. maintaining policy coordination, ideally also across borders, could help to avoid negative feedback effects and optimise the impact of ﬁscal measures. preparation : even though crisis - related policy support needs to be maintained for some time, preparations for an eventual withdrawal should resume [UNK] early on. one element of these preparations is to ensure that insolvency frameworks for dealing with increased corporate restructuring are ﬁt for purpose. institutions administering the restructuring and insolvency processes should have [UNK] capacities and avoid value destruction. addressing the issue of non - performing loans is essential to ensure that the ﬁnancial system is strong and stable and supports sustainable growth. 4 references european systemic risk board ( esrb ) ( 2020 ). recommendation of the european systemic risk board of 27 may 2020 on monitoring the ﬁnancial stability implications of debt moratoria, and public guarantee schemes and other measures of a ﬁscal nature taken to protect the real economy in response to the covid - 19 pandemic ( esrb / 2020 / 8 ) ( 2020 / c 249 / 01 ). [UNK] journal of the european union, 9 june 2020. european systemic risk board ( esrb ) ( 2021 ). financial stability implications of support measures to protect the real economy from the covid - 19 pande

##bility in sectors whose business model may be profoundly affected by the pandemic. in contrast, the announced size of public guarantees and loans is larger in economies hit less hard by the pandemic. as liquidity support, these measures increase ﬁrm indebtedness. the higher the corporate debt levels were prior to the pandemic, the more pronounced the uptake of moratoria has been. in countries with lower corporate debt levels, in contrast, public loans and guarantees have been used to a greater extent. figure 5 a priori, these patterns ensure that already high debt levels do not increase further and possibly become unsustainable through additional borrowing. however, as long as moratoria are in place and debt servicing is suspended, assessing the underlying strength of the borrower is [UNK]. overall, the esrb report ﬁnds that corporate debt sustainability is reﬂected in the design and use of ﬁscal measures. countries which are more exposed to vulnerable sectors offer direct grants, which support ﬁrm ’ s solvency, relatively more than public loans and guarantees, which provide liquidity. also, countries with high initial corporate debt levels tend, on average, to use moratoria to a relatively large extent. this limits the increase in corporate leverage. 3 monitoring and addressing the sustainability of corporate debt will be crucial policy responses to the pandemic have so far contained ﬁnancial stability risks and prevented a liquidity crisis which could have turned into a solvency crisis. fiscal measures, in particular, have supported corporate debt sustainability and have, indirectly, shielded banks from the effects of the pandemic. at the same time, public and private sector debt has increased. future debt sustainability thus hinges on the evolution of future economic activity and interest rates. looking ahead, addressing emerging solvency issues and dealing with corporate distress as well as rising non - performing loans will be important. the magnitude of potential solvency problems and the structural change that is needed remain highly uncertain, also due to the continued crisis - related support. elevated debt levels for households and ﬁrms might become unsustainable if the economic crisis lasts longer than expected. this could lead to an accumulation of losses in the ﬁnancial sector. maintaining and addressing the sustainability of corporate debt will be of utmost importance. this suggests a number of policy priorities : targeting : as the immediate economic pain from the crisis recedes, support measures should become more targeted to sectors and ﬁrms that still require them