It is a shame that the Banking Union (BU) edifice is not quite complete and that we still need to shore up the European institutional framework with a deposit insurance scheme with full European backing. We also need greater regulatory homogenisation, in sensitive areas such as money laundering, fit and proper and insolvency. Developments in the regulatory framework Naturally, the prudential regulatory framework defined by the Basel Committee on Banking Supervision (BCBS) also bears little resemblance to what was in place prior to the financial crisis. As you are aware, the changes affected all the elements that define the capital ratio. Following the introduction of Basel III: (i) the numerator´s capital is calculated according to a new, more demanding definition; (ii) the denominator reflects banks´ risks more conservatively, having translated them into weighted assets; and, finally, (iii) the ratio level demanded has increased considerably, including additional “buffers” which, inter alia, cover the risk posed by systemic institutions. Other complementary metrics have been added to the classic solvency ratio, relating to banks’ liquidity or leverage, and discretionality in the use of internal models, has been limited to reduce procyclicality and prevent excessive variability in the calculation of requirements. All these improvements have been gradually introduced. In Spain the process has run in parallel with the correction of the overcapacity, that the sector had when the financial crisis broke, and with the ongoing clean-up of non-productive assets. The efforts made by the sector have been most considerable, greater even than the charts show.

Coordinated application of these tools will clearly pose a challenge to the new Spanish macroprudential authority (AMCESFI), which published its first annual report on 31 July. I think it may be inferred from what I have said that the definition of macroprudential policy is currently evolving. In the present decade, we are moving from the drawing board to implementation, that is to say from the theoretical framework to practical application, while attempting to learn from experience in other jurisdictions. 4  One of the issues currently under debate is the usability of these buffers and the possible constraints that may limit it. As I have already mentioned, the amendments to the Basel III microprudential framework also include specific capital buffers, for example, to cover the systemic dimension of some institutions or to conserve capital. Clearly these liquidity and capital buffers are helping in the present situation, but banks are reluctant to use them, given the implications that a reduction in the capital ratio would have on the markets and the fact that it could potentially affect the coupon payments on certain issuances. In this respect, the macro and microprudential authorities need to collaborate to coordinate the measures to be adopted in this context. Evidently, many of the actions taken in response to the crisis have implications for both types of supervision. Some examples would include the recommendations on the use of liquidity and capital buffers, supervisory expectations regarding the timeline and conditions for replenishing buffers and, more recently, recommendations on dividend distributions and variable remuneration payments.