In addition, as this buffer is demanded on all exposures, nothing guarantees that its release will affect the provision of credit in a specific jurisdiction. The other instrument in the macroprudential policy-maker’s toolkit to address non-cyclical risks is the systemic risk buffer. Here, we welcome the European initiative to allow its application to sectoral credit portfolios, thus providing it with more flexibility. Finally, let me also stress that, for the moment, the bulk of macroprudential tools affect banks exclusively. While banks continue to account for most financial intermediation, they are losing relevance and could do so even more in the future. This can give rise to regulatory arbitrage and undermine the effectiveness of macroprudential tools. The Spanish case is to some extent innovative5, as similar borrower-based tools to those granted to the Banco de España were given to the financial markets authority (CNMV) and the insurance supervisor for their own sectors. Thus, one of the tests for the Spanish macroprudential institutional setting will be whether it is able to achieve enough coordination across authorities to maximise the effectiveness of the macroprudential toolkit. In any event, we should bear in mind that global financial integration can also have similar effects to the domestic development of the non-bank financial sector, with banking and non-banking entities operating in different jurisdictions. Especially in this last area, major steps have been taken (with reciprocity agreements); but there is still ample room for improvement. I am sure we will be able to address these challenges in future editions of this conference.

At present, however, credit underwriting standards are not contemplated in European legislation, although some authorities, including the Banco de España, are empowered to set them. I do believe that consideration should be given to including them in future revisions of the European regulation. In my view, this would offer at least three advantages. First, it would allow harmonisation of the different dimensions of the credit standards. Second, it would enable the different jurisdictions to request reciprocity of the measures adopted, which would duly make them more effective. Last but not least, it would allow the European Central Bank to top up the measures, reducing the potential inaction bias of national authorities. On the use of borrower based tools vs capital instruments, it seems reasonable, in my view, that, if credit is showing high and sustained growth over time but without credit standards being relaxed, the ideal would be to increase entities’ resilience using capital instruments. But, even if credit were to show moderate growth, if the conditions for granting these loans are being relaxed (thus increasing the volume of credit at risk of default), it would probably be more efficient to use the borrower-based tools to guarantee sound credit underwriting standards. In any case, our experience shows that, especially at the end of expansionary credit cycles, high increases in the volume of credit tend to go hand-in-hand with a substantial easing of the conditions for granting the loans. Accordingly, both types of tools should perhaps be used simultaneously. With what gradation?