of debt restructuring procedures can also help preserve the business continuity of viable firms. debt restructurings can be carried out through formal insolvency proceedings in courts of law or also through out - of - court proceedings, either through pre - insolvency legal mechanisms or through private renegotiations. court proceedings tend to be lengthy and costly processes, reducing the business value of the firms involved and often leading to their liquidation, and the success of private renegotiations in out - of - court proceedings can be limited, among other aspects, by collective action problems. the potentially large number or companies, smes in particular, that may be affected by these solvency problems in the current crisis plus the fact that the public sector can be an important creditor as well, given the generalised use of public guarantees during the crisis, introduce additional difficulties or specificities that should also be taken into account. in sum, withstanding the negative consequences of the covid - 19 crisis on the solvency of viable firms, is currently a major challenge for economic policymakers. swift policy action taken since the start of the crisis allowed a liquidity crisis to be avoided and has helped translate the medical advances against the disease into more positive macroeconomic scenarios. however, we must now be ready to react to these solvency risks in order to prevent the current crisis from developing a financial component which, as we painfully know from recent experience, would only make the crisis more lasting and socially and economically more costly. thank you for your attention. 2 / 2 bis central bankers'speeches

pablo hernandez de cos : how to preserve pandemic - struck viable firms for a stronger recovery introductory remarks by mr pablo hernandez de cos, governor of the bank of spain and chair of the basel committee on banking supervision, at the european systemic risk board ( esrb ) virtual seminar on “ corporate insolvencies and public support measures ”, 29 april 2021. * * * many thanks to the esrb secretariat for organising this seminar. and let me also thank and welcome all participants to this event. i will devote these brief opening remarks to outline why, at the esrb, we consider the topic of the seminar “ corporate insolvencies and public support measures ” a very relevant and timely one. the starting point is our perception that, in the context of the current crisis, even if the macrofinancial outlook has improved, uncertainty remains high. and one of the main elements of this uncertainty is precisely related to the extent of the damage inflicted by the crisis on the corporate sector, whose magnitude will be a key determinant of the persistence of the crisis and the strength of the economic recovery. therefore, we need to measure this risk carefully and be ready to adapt our policies to mitigate it to the extent possible. and this is particularly relevant in the current phase of the crisis. in the first phase, the crisis generated a significant decline in firms ’ revenues relative to fixed costs ( such as supplies, rentals, labour costs ) that led to an increase in firms ’ liquidity needs on top of those derived from the amortisation of pre - existing debt. in turn, this raised the risk that some of these corporates would not be able to meet their payment obligations ( liquidity risk ) together with a non - negligible probability of negative spillovers to other companies. the decisive and forceful action of economic policies has helped mitigate this risk to a great extent, so that a large proportion of these firms with liquidity needs were able to cover them. key measures included, for example, furlough schemes that help to alleviate fix costs, and also public guarantees for business financing that have allowed for the liquidity needs to be financed. however, as the crisis unfolds, concern is shifting from liquidity risk to the deterioration of the solvency position of firms, associated with the combination of higher levels of debt as a result of the crisis with still low profitability expectations for the coming quarters, especially in sectors most impacted by the crisis and