https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32013R1024&from=en 9  See Recitals 7 and 12 and sub-recommendation B3 of “Recommendation of the ERB of 22 December 2011 on the macro-prudential mandate of national authorities” (ESRB/2011/3): https://www.esrb.europa.eu/pub/pdf/recommendations/ESRB_2011_3.en.pdf 10  See Recital 24 of Regulation No 1092/2010 of the European Parliament and of the Council on European Union macroprudential oversight of the financial system and establishing a European Systemic Risk Board: The ECB and the national central banks should have a leading role in macro-prudential oversight because of their expertise and their existing responsibilities in the area of financial stability. National supervisors should be involved in providing their specific expertise. The participation of micro-prudential supervisors in the work of the ESRB is essential to ensure that the assessment of macro-prudential risk is based on complete and accurate information about developments in the financial system. Accordingly, the chairpersons of the ESAs should be members with voting rights. One representative of the competent national supervisory authorities of each Member State should attend meetings of the General Board, without voting rights. In a spirit of openness, 15 independent persons should provide the ESRB with external expertise through the Advisory Scientific Committee. https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=OJ:C:2016:202:FULL&from=EN  5/9  the banking sector should be activated or deactivated. Accordingly, other sectoral financial regulators are given responsibilities for activating their own tools.

Participation in the monetary union also entailed a change in the relationship between Treasury and central bank so as to incorporate the prohibition of monetary financing of government deficits. Central bank independence was granted with a large degree of legal protection and, as a matter of fact, no country in the European Union can change it at its own discretion. Of course, the independence of the central bank does not mean arbitrariness, as it is well counterbalanced by high transparency and accountability requirements and practices. Granting independence to the Banco de España some years before the introduction of the euro as a common currency reflected Spain’s strong ambition to become a founding member of the European Economic and Monetary Union. It was also the result of a firm political conviction as to the benefits of price stability and the advisability of delegating the pursuit of this goal to an independent central bank. Price stability requires a medium-term orientation and the independence of the monetary authority creates credibility by helping to keep inflation expectations anchored while avoiding time inconsistency problems.1 These reasons were particularly compelling for the Spanish economy in light of the previous experience of relatively high inflation. 1  The main argument to preserve central bank independence is that it avoids the so-called time inconsistency problem. When the monetary authority is not independent, it may consider other, shorter-term legitimate objectives, and may use monetary policy to repeatedly boost aggregate demand above what would be consistent with its inflation objective.