During the first phase of the pandemic a liquidity crisis was avoided, and the financial system continued to function. Up to one-third of new bank lending to companies has been subject to crisis related fiscal measures, and the prompt action taken by governments has been essential to mitigate the impact of the crisis on households and firms. The financial system has benefited from fiscal support programmes as well as from monetary policy. Moreover, a flexible approach within the existing regulatory frameworks has supported these measures, also by temporarily relaxing some bank balance sheets constraints. Overall, spillovers from the real economy to the financial system have so far been contained.