Mention may also be made of the traditional conservatism in provisioning policy, advocated by the supervisor, which has enabled banks considerably to ease the impact of the economic crisis on their solvency levels. On this latter point, the necessary harmonisation of the supervisory approach within the single supervisory mechanism may be expected in the medium term to entail some significant changes. In particular, it would be reasonable to expect that accounting requirements for banks tend to converge towards a common interpretation of the international financial reporting standards applicable in the European Union by mandate of the related Community Regulation. Consequently, the use of provisions as a supervisory policy tool will foreseeably diminish somewhat in significance, given that the determination of provisions will be steered to a greater extent by general accounting rules that naturally tend to set greater store by transparency and investor safeguards than by strictly prudential considerations. As a result, the supervisory focus for Spanish banks will shift in the new institutional framework from an approach under which the monitoring of accounts was foremost to one where, while maintaining rigour in the revision of financial statements in respect of the classification and recognition of impairment of assets, the demand for high levels of capital is reinforced. Indeed, worldwide supervisory practice is following a clear trend, to which the single supervisory mechanism will immediately adhere according to the supervisory manual under preparation.

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.