Similarly, banks should address the technology risk stemming from the impact of the adoption of new technologies on, for example, the probability of suffering cyberattacks, with extremely high potential effects on operational risk and banks’ own reputation. Lastly, climate change and the transition towards a more sustainable economy pose another key challenge. Although this affects all economic agents, it is particularly important in the financial sector. Banks face two types of risks in this area: “physical” risks linked to the direct effect of climate change on their asset values, and “transition” risks linked to the process of technological and regulatory transition to a more sustainable economy. In coming years, identifying, quantifying and mitigating these risks will require considerable effort, although the notable development of green sustainable financial markets in Spain in recent years should be highlighted. 2. Low interest rates and banks’ risk appetite In a low interest rate setting, there are greater incentives for economic agents to take on greater risk. The work of the macro- and microprudential authorities consists in ensuring that this greater risk-taking is not excessive and does not ultimately generate problems for financial stability. The authorities should use the various prudential instruments at their disposal to prevent this from occurring. The longer interest rates remain low, the more likely it is that risk-taking may become excessive. Clearly, deposit institutions are not immune to this, especially when profitability is low. Let us now assess the situation in this respect in the case of the Spanish banking sector.

Clearly, these estimates are only illustrative and should be understood as a ceiling for the actual effects, as it is probably difficult to achieve such a low non-performing loan ratio in a setting of lower indebtedness and with significant changes in credit portfolio composition. 17/29  And also because part of the increase in banks’ costs are the result of technology investments, which are allowing banks to adapt to the new environment and are therefore essential. They are also indicative of the measures that banks should be prioritising. Fourth, the role that consolidation can play as a mechanism for harnessing economies of scale and improving efficiency and, therefore, for increasing profitability, is regularly discussed. Added to this is the cost pressure associated with the high IT investments being made to address changes in a competitive environment with new competitors. And also the need for banks to have preferential access to international capital markets to be able to respond efficiently to the implementation of the new post-crisis banking regulations and, especially in Europe, to comply with the MREL requirements. In the last decade the Spanish banking sector has already undergone a very significant consolidation process. Specifically, since 2009 the number of banks has fallen by more than 30%. Looking ahead, potential future consolidation processes should be led by the market, in other words, by value creation for shareholders, while we supervisors should ensure that these processes do not undermine financial stability.