This is progressing slowly because their income is weak and so the adjustment has to proceed mainly through the contraction of credit. Under these conditions, aggregate credit to the private sector will probably still take some time to achieve positive rates. This situation at aggregate level can and should be compatible with differing behaviours of credit to firms and to households, so as to allow financial resources to flow to those sectors in a solid position to undertake viable spending, investment and hiring projects. The results of preliminary analyses at the Banco de España indicate that such reallocation of financial resources is already taking place. However, there are still some frictions affecting most notably lending to SMEs, which as you know are particularly vulnerable to crises such as that we have witnessed. 4  BIS central bankers’ speeches  Under its remit, the Banco de España has recently adopted specific measures addressing this sector, such as the redefinition of SME for the purposes of prudential regulation or the early application of the supporting factor for capital requirements associated with SME loans. The Banco de España has also identified possible courses of action in other areas. A far-from-exhaustive list would include exploring ways of strengthening the role of the ICO, simplifying the current public framework of financial support to SMEs and, in the longer term, designing mechanisms to capture homogeneous high-quality information on the most significant aspects of SMEs’ business to make it easier for them to access bank credit.

If an effective global resolution regime with clearly defined ex ante characteristics were to turn out to be a bridge too far, national authorities may have to fall back on a subsidiarization model, in which global firms would have to establish subsidiaries on a country-by-country basis each with their own capital and liquidity buffers. Such a regime would require greater capital and liquidity as the banks would lose the significant risk diversification benefits gained from operating in many different countries. Such a regime would also presumably make it more difficult for these firms to provide financial services seamlessly to multinational corporations, global asset managers, and others that operate on an international basis. Even in this scenario, however, it would be important to ensure that national resolution regimes could interact with each other in a coherent manner. To sum up, my view is that we live in a globalized world both with respect to the macro-economy and the financial system. But too often we set macroeconomic policy and regulatory policy at a national level, and miss important opportunities to coordinate and make the global economic and financial system stronger overall. We need to understand where greater global perspective is required and we need to apply that perspective consistently across jurisdictions in a timely manner. If we don’t do this, we won’t achieve all the benefits that are possible from global specialization and we will continue to run significant risks with respect to financial stability. Thank you for your kind attention. 4  BIS central bankers’ speeches