The second concerns strengthening corporate governance. Banking supervision cannot and should not replace company directors and senior managers in the performance of their functions or the discharging of their responsibilities. Naturally, then, the contribution of bank directors and senior managers is essential if sounder, more stable and more efficient systems are to be attained. Achieving appropriate corporate governance standards contributes to corporate health, increases market confidence and promotes efficiency in the economy in general. Legislators, supervisors and, above all, entities themselves should promote the sound functioning of companies through the following key aspects: management transparency; the reliability and integrity of accounting information; the protection of shareholders; and the appropriate treatment of conflicts of interest. Also vital are the accountability of boards of directors and the suitability of their composition and procedural rules; guarantees that key decisions are adopted by the appropriate collegiate bodies and then duly recorded and conveyed to the market with sufficient transparency; and the setting up of audit, remuneration or appointment committees with clear objectives so as to ensure their effectiveness. To be effective, the adoption of any code in this area should be supported by appropriate structures and procedures. It will also require substantial participation and commitment by the company's directors and managers. Specifically, I should like to stress the importance for good corporate  8  BIS Review 38/2002  governance of an audit committee that is suitably composed and committed and on which nonexecutive directors form the majority.

The increase in private debt is a logical response to the new setting of lower interest rates in the Spanish economy, but it has also increased the exposure of this sector to potential adversities. As the expansionary effects of this process of adaptation by our economy to the new environment ease off, progress towards real convergence at similar rates to those at present will require that growth be underpinned by more stable factors. Main challenges facing the Spanish economy This overall positive assessment of the Spanish economy, even during the recent slowdown, should nonetheless not conceal the presence of certain rather unsatisfactory aspects. These include the positive gap with the euro area in terms of price and cost growth, the flatness of investment in capital goods and low productivity gains. To further real convergence, these problems must be overcome. In this connection, economic policy action should be geared primarily to promoting competitiveness, in the broadest sense of the term, where aspects linked to the behaviour of prices and costs combine with others related to growth potential. Regarding the behaviour of prices, and despite the substantial progress made towards nominal stability since the mid-nineties, the persistence of an inflation differential with the euro area poses risks in respect of future competitiveness. The wage restraint characterising the most recent phase of the Spanish economy has passed through unevenly to the sectors exposed to competition and those sheltered from it.