rebalancing of the budget in the medium term. it is essential to look further ahead : the long - term sustainability of the public finances is fundamental to ensure the effectiveness of policies in the short term as well. monetary policies the central banks have made a prompt and coordinated response to the crisis. official interest rates have been lowered rapidly ; in many countries they are near zero. worrying about getting too close to the lower limit for nominal interest rates cannot be a reason for inaction. the experience of the united states in the 1930s and of japan in the 1990s suggests that in the initial stages of the crisis it is necessary to counter the tendency of real interest rates to increase. rapid disinflation must not be allowed to turn into deflation. the ecb has reduced its reference rate by 225 basis points since last october. in the euro area the real short - term rate is now below 1 per cent ; if official rates had not been cut, it would have risen considerably because of the fall in inflation. the governing council is keeping a close watch on the real cost of money. the main central banks have injected liquidity in unprecedented quantities. they have extended the range of their own instruments for action. in some cases, they have intervened directly by buying corporate debt, reactivating the circulation of credit where it had been blocked, helping to finance the private sector. they can act to influence long - term interest rates. to date, the judgement on the effectiveness of these measures is favourable. 1 when macroeconomic conditions return to normal, the liquidity pumped into the economy should be rapidly drained. the adoption of a strategy to return to normality is premature until see ben s. bernanke ’ s testimony to the committee on financial services, us house of representatives, washington, d. c., 10 february 2009. output and employment have stopped falling : but, as with fiscal policy, it is important to provide for it from today to ensure the effectiveness of the monetary expansion, firmly anchoring long - term inflation expectations and countering any speculative bubbles in the prices of financial and real assets. policies for financial system stability and the revival of credit reactivating financial intermediation remains essential to get over the recession and return to lasting growth. the surrogate role played by central banks can only be temporary. interventions in the united states and europe last autumn ( guarantees on deposits and bank securities ) affected the liability side of bank balance sheets. they prevented the collapse of the system, reviving some

sectors hardest hit by the pandemic and by the higher energy costs. in a similar vein, forborne loans, 1 most of which are classified as stage 2 or non - performing, were down by 7. 7 % to june 2022, with their share of total lending shrinking to 4. 5 %, again below pre - pandemic levels. second, the profitability of the spanish banking industry continued to improve in the first half of the year, adjusting for the extraordinary profit recorded largely as a result of the mergers that took place in 2021. specifically, the sector ’ s roe stood at 10 % in h1, up by forborne loans are also typically associated with possible repayment difficulties for borrowers ; indeed, more than half are classified as non - performing. 2 percentage points ( pp ) on june 2019. this was higher than our estimated cost of capital for the period ( 7 %, similar to the level estimated prior to the pandemic ). this improved profitability owed to a better performance in banks ’ recurring business, with growth of more than 10 % in net interest income and in fees and commissions. it is worth noting here that banks are beginning to pass through the increase in money market interest rates to new loans, albeit, for the time being, far more slowly than in the past. evidently, for variable - rate loans the impact is automatic, but it will likewise take some time. for their part, banks ’ wholesale funding costs are reflecting the tightening of financial market conditions, while risk premia are also rising. as yet, however, deposit interest rates have not increased, and to june there has been no significant shift of funds towards term deposits. further, listed banks as a whole recorded a year - on - year increase in impairment losses to june, as a result of specific contributions from business abroad, but at most banks these impairment losses declined. in any event, impairment provisions remained slightly higher than those recorded before the onset of the pandemic. third, as regards solvency, the overall common equity tier 1 ( cet1 ) ratio of spanish banks stood at 12. 9 % in june 2022, down 50 basis points ( bp ) on a year earlier, but 70 bp above the pre - pandemic level ( 12. 2 % ). the recent reduction owed to the increase in risk - weighted assets, since the numerator of the ratio barely changed. this solvency level implies higher voluntary capital buffers than key regulatory