In Spain, recent experience has shown how inefficient the existing insolvency proceedings for credit institutions are in terms both of timelines and recovery in value. It would, therefore, be desirable for progress to be made in determining an administrative mechanism for winding up credit institutions that maximises the preservation of value and reduces both the timelines and the costs of the existing insolvency proceedings. The need to address the long-term challenges If the current crisis has done anything it has been to underline the importance of having a healthy banking sector with sufficient buffers to absorb unexpected risks. In this connection, going forward we must ensure that the banking sector remains resilient to any new risks that might emerge. Completing Basel III and expanding the macroprudential toolkit available to the Banco de España are two particularly important avenues of work. To more accurately measure the risks assumed by banks and thus reinforce the credibility of their capital ratios, particular focus was placed on the calculation of risk-weighted assets (RWAs) in the second phase of the Basel reforms, approved at the end of 2017. Standardising the treatment of RWAs across institutions was considered necessary. The output floor is a key part of the reform to achieve this goal. The floor limits the benefits banks can derive from using internal models to calculate minimum capital requirements vis-a-vis the standardised approach, which does not require the use of models and is much less sensitive to new information.

— 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.