These assessments have been recently upheld by the comprehensive assessment exercise for the European banking system carried out by the ECB, in collaboration with national supervisors, as a prior step to the start-up of the SSM. The Spanish banking industry can claim today to have healthy balance sheets and to be considerably resilient to potentially adverse macroeconomic scenarios with a limited probability of occurrence. The European banking industry following the comprehensive assessment exercise From a European standpoint, the exercise identified certain banks whose solvency had to improve, a matter which will no doubt be among the priorities of the SSM, to which I will later refer. Broadly, the exercise highlighted the fact that European banks evidence ample solvency and that the asset quality review did not detect significant valuation failings or substantial provisioning shortfalls. In short, the ECB’s comprehensive assessment contributed to allaying doubts over the vulnerability of European bank balance sheets and over their resilience, both of which had been identified as factors of risk to financial stability. That said, the European banking industry faces a series of additional challenges stemming from the changes under way in regulation and supervision, which have arisen as a response to the financial crisis. I shall now turn to some of these challenges, beginning with those linked to the current macroeconomic and financial situation. BIS central bankers’ speeches  1  First, it is a concern that in some market segments investors, in their search for yield, may be taking on excessive risks.

That will call for a detailed review of the risk models used by banks and the adoption of corrective measures should unjustifiable deviations be detected. Macroprudential policy Macroprudential policy, insofar as it seeks to identify systemic risks, prevent them and increase the industry’s resilience, has an important role to play. The very nature of these risks is global in dimension, meaning that coordination between the various authorities with responsibilities in this field is needed. At the same time, it should be borne in mind that while the risks may be considered common to the euro area as a whole, their impact and intensity vary from country to country. This heterogeneity not only depends on the characteristics of each country, but also on the particular juncture of the financial cycle. For example, at present certain euro area countries evidence risks associated with excessive real estate market prices, while in others this risk is not discernible. Macroprudential policy thus requires a coordinated approach by the various institutions, and at the same time attention must be paid to considerations of a national nature. In a monetary  BIS central bankers’ speeches  3  union like the euro area, the heterogeneity of the member countries’ financial cycles may be an important issue when it comes to designing these policies. The European Systemic Risk Board was set up in late 2010 as the authority responsible for macroprudential oversight in the European Union, empowered to issue warnings and recommendations in this connection under the “act or explain” principle.