This was presented as a global stabilisation mechanism in which the IMF would act as kind of whistle-blower by using its surveillance activities to identify events that risk triggering market unease, which in turn could lead to problems in the financial system. In addition, the IMF could propose measures that aim to reduce the risk of problems spreading from country to country, mediate contacts between countries and central banks to arrange swap lines, involve regional financing arrangements and, of course, also provide loans itself.6 However, proposals of this type find it difficult to “take off”. This because  5  This is also taken up as a recommendation in the IEO’s report; see IEO (2011), “IMF Performance in the Run-Up to the Financial and Economic Crisis, IMF Surveillance 2004–2007”. 6  Proposals for the build-up of an international structure for the financial system are also presented in the Palais Royal Report, which was published in early 2011. This report was written by 18 former central bank governors  6  BIS central bankers’ speeches  although the economy is globalised, policy remains largely national. Governments want to retain their national sovereignty and central banks their independence. So, to sum up, many good proposals are now under discussion and we need to continue to clearly pursue our issues here. But building supranational structures is complicated, as the on going development of institutions in the euro area reminds us. And there it is a question of “only” 17 countries and governments that have to compromise and reach agreement.

It should also be ensured that the macroeconomic scenarios envisaged have a similar likelihood of occurrence in all jurisdictions and that the estimation of capital needs acknowledges the existence of diverse national accounting frameworks in which provisioning requirements are defined to differing degrees of stringency. As I said, while the challenges of this task are not minor, work is proceeding apace at the EBA, the ECB and NCAs to ensure that the exercise meets the best quality standards. 3. How are Spanish banks facing up to these exercises? We may well ask how Spanish banks are facing up to these exercises. As is known, the financial sector has recently undergone intense reform involving the clean-up of balance sheets, recapitalisation and restructuring, and the resolution of non-viable institutions under the recently concluded financial assistance programme. As you will recall, this process rested largely on an asset quality review exercise and a stress test similar to those now being undertaken as part of the preparations for the single supervisory mechanism. There are, in any event, some notable differences that should be taken into account when comparing both exercises. For instance, the Spanish asset review exercise involved an BIS central bankers’ speeches  3  exhaustive analysis of all domestic business, while its European counterpart will review a selection of portfolios, albeit encompassing both domestic and foreign-based business. Further, although the 2012 stress test envisaged a highly adverse macroeconomic scenario, its focus was on the loans portfolio of institutions in Spain.