In the wake of the financial crisis, the arsenal of macroprudential tools has expanded significantly. Apart from the countercyclical capital buffer we have the systemic risk buffer, the buffers for globally and domestically systemic banks, the possibility to limit large exposures, increase capital or revise risk-weighted assets to residential and commercial real estate exposures. This is a significant improvement that will allow us to develop macroprudential policies that interact with microprudential ones as well as with monetary policy. But it is not enough to create macroprudential tools. They must be properly allocated institutionally in order to avoid inaction bias by policy-makers and counteract misalignment of incentives with the financial sector, in particular at certain points in the lending/financial cycle where taming is needed. In a sense, the dilemmas and incentives that policy-makers will face regarding macroprudential policy decisions will not be far different from those encountered in the past when setting monetary policy (i.e. interest rates). For the latter, the optimal institutional design is to enshrine monetary policy in an independent central bank. For the former, a very similar solution, intuitively, should prevail, although the theoretical framework and the empirical research to support it is much less advanced than in the monetary field. Needless to say, macroprudential policy is particularly relevant for a country like Spain, part of a monetary and banking union where, as seen in the past, the financial and business cycles of the member countries may be in different positions.

For a successful implementation of the new loss-measure approach, banks’ forecasting capacity in respect of economic downturns and anticipation of significant deterioration of both credit standards and credit risk are key. As such, banks should strive to apply and use the appropriate procedures to ensure the timely determination of future significant increases in credit risk and, more generally, they should be able to properly adjust their models and predictions to the existing macroeconomic conditions at any time, regardless of how frequently they may change. Let me briefly review what may be considered the main challenges for this new paradigm of provisioning, rightly following the content of each of the conference panels. Panel I of the conference will enlighten us with relevant background information to fully understand why and how the new provisioning model has changed, the potential pros and cons of alternative approaches, the differences between models and the reasons behind those differences. As briefly commented, modelling expected losses is a challenge. In Panel 2, views from academia, practitioners and auditors will no doubt help us to broaden our perspective on issues such as the existing differences between the models needed to calculate the new provisions and those already in use for regulatory purposes, or for internal credit risk management. Implementation issues, apart from the pure modeling challenges, such as compliance costs, reliable reporting under the new standards, comparability of financial statements across institutions, internal organisation, etc. are highly interesting aspects that will also be presented from the industry and supervisory viewpoint in Panel 3.