By way of example: geopolitical considerations, present and future macroeconomic scenarios, regulatory and supervisory developments, technological developments and the emergence of new competitors. The bank must also take into account its starting point, its strengths and weaknesses, and how it compares with its peers. As you all know, new competitors need not be other banks, but the so-called fintech companies, which are destined to exert pressure on and accelerate the ongoing technological renewal of financial institutions. Undoubtedly, therefore, part of banks’ strategic drive should focus on how to face this challenge and the competition. 4/8  I would next like to address four key aspects from the strategic standpoint: capital; the legacy of non-productive assets; liquidity; and governance. As regards capital, while Spanish banks have strengthened their capital base and, consequently, have improved their ratios in recent years, duly meeting the minimum requirements, there are no grounds for complacency. Firstly, although the current situation is that Spanish banks have, on average, high asset density (measured by their risk-weighted assets) and low leverage levels, it is also a fact that they continue to have lower capital ratios than their European peers. On EBA data for March 2018, Spanish institutions’ CET1 solvency ratios are below the EU average at that date (14.4%). This shows that Spanish banks must continue making headway in one of the key elements of the new rules of play, namely that they must have more and better-quality capital than before the financial crisis.

Both documents, the guidelines and the addendum, clearly demonstrate the attention the supervisor has been paying to credit risk in general, and to non-performing exposures in particular, and they represent the benchmark supervisory tool in the supervisory dialogue with banks. In July 2018, the ECB announced that, along with the foregoing, and with the aim of achieving similar coverage of the flows and stock of non-performing loans, the setting of bank-specific supervisory expectations in respect of prudential provisioning levels for the stock of non-performing loans would also form part of the supervisory dialogue. The better prepared institutions are for this dialogue, the more fluid it will be. Before addressing the last of the key strategic aspects I wish to talk about today, namely governance, I believe it should be said that any strategic reflection should also include appropriate liquidity planning. This should take into account those elements that may most affect it, with particular attention to monetary policy implementation decisions. To conclude these considerations on strategic reflection by banks, I shall refer to governance and risk management. The crucial element for being able to properly manage and attain profitable business models over time is to have suitable governance structures. Governance structures shape the decision framework on risks. They are thus determinants of how a bank’s risk profile develops and, ultimately, of its medium and long-term sustainability. They are a necessary and basic element without which success in any project cannot be expected.