Luis M Linde: IV Meeting – Financial System Reform Speech by Mr Luis M Linde, Governor of the Bank of Spain, at the inauguration of the meeting on “Financial System Reform” organised by Expansión, Madrid, 9 July 2013. *  *  *  Introduction It is an honour for me to participate in the inauguration of this meeting on “Financial System Reform”, organised by Expansión. Given the agenda and the list of participants, this meeting will be an excellent opportunity for players in the Spanish financial system to review the latest developments and to assess, from the standpoint of their own institutions, the more immediate future. The future of our financial system and of our banks will necessarily be framed within the new international regulatory system, whose design has been under way since the international economic and financial crisis broke six years back, in 2007. This crisis, whose consequences have clearly not yet been overcome, has given rise to numerous initiatives. Various international financial organisations, public and private alike, including the International Monetary Fund and the Bank for International Settlements, have been involved in studying and addressing such initiatives. But we should mention, above all, the establishment of new institutional frameworks. These include most notably the creation of the Financial Stability Board (FSB), which was promoted by the G20 and has assumed a key role in designing and coordinating international financial reform. We have also seen the main economies create institutions entrusted specifically with overseeing the financial system from a macroprudential perspective.

In particular, their application should not entail a shift of the riskiest activities to the shadow banking system. In sum, before introducing new structural measures, their costs and benefits should be evaluated from a global perspective, bearing in mind progress in other areas of regulatory reform, especially those concerning new resolution frameworks and the treatment of systemic banks. In any event, it seems reasonable to observe the principle that regulation should impose stricter requirements on the riskiest activities. A clear distinction should be drawn between banks whose trading volume is relatively small and geared chiefly to providing services to their customers, and those other banks with a more marked risk profile. Strengthening of and convergence in accounting standards The last issue I wished to address concerns accounting rules. In April 2009, the G20 called on the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) to adopt measures to strengthen and more closely align their respective standards. As a result, the treatment of business combinations and the consolidation of financial statements have been reviewed, with particular emphasis on the specific features of special-purpose vehicles. Work has also been done on defining fair value and on the criteria to be taken into account in its determination. However, accounting standards-setters have not yet reached agreement on the treatment of impaired financial assets (through credit risk provisions, as they are traditionally called).