— including the ability to decide autonomously when and how to use macroprudential tools — and for ensuring such institutions conduct themselves appropriately in their relationships with their customers should be separated and assigned to different authorities (the Banco de España and the CNMV, respectively, in Spain). This would, in my view, be an optimal institutional framework for managing possible conflicts between these two responsibilities and for making supervisory activity more efficient and effective, especially against a backdrop of increasing interconnectedness between financial sector players, with the emergence of growing numbers of financial conglomerates. Moreover, there are obvious synergies in the joint supervision of such conglomerates, using similar approaches, methodologies and resources.15 Further, it will be important to respond to new risks that emerge, such as climate change or digitalisation. It is crucial that the sector should incorporate into its decision-making processes climate change risks, physical and transition-related alike. As supervisors we must ensure that banks correctly assess the risks associated with climate change and incorporate them into their portfolio management. To achieve this, we must perform a complementary role by developing appropriate reporting requirements and databases, and incorporating the risks into financial stability analyses. Indeed, many supervisors (including the Banco de España) are developing environmental stress tests.16  15  Here we should also include the functions relating to the resolution of financial institutions, which in Spain are separated into the preventive resolution authority (the Banco de España) and the executive resolution authority (the FROB), within the framework of the European Single Resolution Mechanism.

2  See Giavazzi, F. and F.S. Mishkin (2006), "An evaluation of Swedish monetary policy between 1995 and 2005”, Reports from the Riksdag 2006/07:RFR 1, Committee on Finance. See also Sveriges Riksbank (2006), “Material for assessing monetary policy 2003-2005”, box in Inflation Report no. 1 and Sveriges Riksbank (2005), “Material for assessing monetary policy 2002-2004”, box in Inflation Report no. 1. 3  See the references in note 2. 4  BIS Review 52/2007  The Riksbank’s calculations imply, for example, that an interest rate a half a percentage point lower for six months would have led to lower unemployment corresponding to two or three tenths of a percentage point. However, I would like to emphasise that this type of calculation is very uncertain. Given this, I believe that monetary policy cannot be said to have contributed significantly to the high unemployment. What other possible explanations are there? What can explain the rise in unemployment? As I mentioned initially, unemployment was held down in the 1970s and 1980s with an economic policy that was not sustainable in the long term. I believe that this could have concealed structural problems in the labour market that only became visible when the economic policy regime was changed in the early 1990s. If one studies unemployment, particularly total unemployment, over a long period of time, one can see that it has shown a trend increase ever since the end of the 1960s. This also applies if one excludes the years after the change in economic policy regime.