This new set of powers has been introduced rather quickly –over a few short years – and this leaves us with a number of questions still awaiting answers. We need to better understand the effectiveness of the new instruments in improving the resilience of the financial system, in reducing systemic risks, and the trade-offs between different policy options. We also need to understand how macroprudential policies can affect risk-taking attitudes by different agents and to what extent the provision of credit to the real economy may be affected, especially during difficult periods. After a thorough analysis, it might be the case that the current macroprudential toolkit is still insufficient or incomplete. The European Union’s macroprudential framework is currently under review and different possibilities are being contemplated to fine-tune the applicable legislation and to introduce additional instruments. Over the last decade we have observed that bank-like activities are increasingly being undertaken by non-banks, in particular the so-called shadow banks. There is a debate about expanding the scope of the macroprudential instruments beyond the banking system. Another area of discussion is whether it will be necessary to introduce borrower-oriented instruments in order to address in a more effective way misalignments in real estate markets. For all these issues, your analyses and new insights are, indeed, important. So, we have ahead of us a large amount of work and avenues for research. As regards the Conference programme, some of the topics I referred to will be discussed today and tomorrow, as well as the interaction with other policies.

Needless to say, macroprudential policy cannot be fully understood without assessing how monetary, microprudential and even fiscal policies may affect financial stability. 4/5  Experience at the Banco de España with dynamic provisions Let me finish by briefly referring to our own experience in dealing with financial stability. Spain was among the European countries building up very pronounced imbalances over the opening years of this century and, then, going through a very severe crisis. The Banco de España was, I believe I may venture to say, a pioneer in developing macroprudential tools, by introducing countercyclical provisions as early as the year 2000, a short time after the launching of the European Monetary Union. Research carried out at the Banco de España shows that these provisions, although not able to counter the strong credit growth in the boom years, proved effective in smoothing the credit contraction during the early years of the recession. In addition, “dynamic” or “statistical” provisions –the names more frequently used in Banco de España papers when those provisions were first implemented– were, I think, a kind of inspiration for the countercyclical capital buffer, an instrument developed and agreed by the Basel Committee in 2010, and now widely implemented around the world. Dynamic provisions can also be considered, with some nuances along the way, the precursor of expected-loss provisions. The recent introduction of expected-loss provisions has entailed a change of the accounting paradigm, which, so we think at the Banco de España, was long overdue from a banking supervisory perspective.