Macroprudential policy As you all know, a macroprudential authority (AMCESFI) has been in place in Spain since the start of the year. Its main task involves contributing to the coordination and exchange of information on financial stability-related aspects between the Banco de España, the Ministry of the Economy and Enterprise, the National Securities Market Commission and the Directorate General of Insurance and Pension Funds. In parallel, the supervision of the financial system as a whole has been bolstered by the extension of the macroprudential tools available to the sectoral supervisory authorities. Some of these new tools, in particular those of the Banco de España based on borrowers’ ability to pay, aim to prevent an excessive easing in lending standards on the part of banks and to contribute to the sustainability of household and corporate debt. These new instruments complement those already being used by the Banco de España: the countercyclical capital buffer, the systemic risk buffer and the buffer for systemically important institutions, among others. Overall, this new institutional framework and the attendant powers mark progress and the strengthening of financial stability in Spain. In fact, in my opinion1, the introduction of macroprudential policy instruments to complement monetary and fiscal policy is probably one of the most significant advances in the wake of the international financial crisis. For countries which, like Spain, belong to a monetary union, these tools are particularly important. They are some of the few instruments available in the national realm to ensure the stability of the domestic financial system.

Indeed, for European banks affected by big operational events, this deterioration has stood at over 1.25 pp of CET1 in the past five years, with a rise to 2.1 pp in 2018. In Spain’s case, the potential materialisation of costs associated with legal risks continues to contribute to deposit institutions’ operational risk. The processes linked to past litigation such as that of the floor clauses have had an estimated cost for the sector  7/10  of over € billion to June 2019. Moreover, there are other significant legal processes still pending resolution. In any event, legal risk and certain other factors relating to banks’ conduct have had a considerable impact on the reputation of the banking sector, and not only in Spain. It is worth recalling here that reputation and customer confidence are fundamental to the banking business. Therefore, institutions should strive to reverse this tendency by providing their customers with financial products and services suited to their needs and capabilities, and they should likewise supply the relevant information clearly and transparently. Lastly, in relation to the systematic assessment of the balance of risks to financial stability that we regularly make at the Banco de España, we are including other elements, whose materialisation could occur over a longer horizon. I refer here to the potential changes technological innovation may entail for the market structure of the financial sector, and those arising from climate change. The importance banks give to these changes will have to increase accordingly.