Fernando Restoy: The organisation of financial supervision Speech by Mr Fernando Restoy, Deputy Governor of the Bank of Spain, participating in the presentation of the “Guide to the Spanish Financial System” (Guía del Sistema Financiero Español), compiled by AFI (Analistas Financieros Internacionales) and sponsored by Funcas (Fundación de las Cajas de Ahorros), Madrid, 18 January 2016. *  *  *  Introduction Good afternoon. I should like to thank Emilio Ontiveros for his invitation to participate in the presentation of the seventh edition of the Guide to the Spanish Financial System, compiled by AFI and sponsored by Funcas. Thank you, also, Emilio, for your kind and, as ever, overly generous introductory words. The new version of the guide accurately details the numerous changes in the wake of the crisis, essentially owing to the start-up of the banking union in Europe and to the considerable reinforcement of regulatory requirements. As a result, the guide firmly stakes its claim as a reference that has proven extraordinary useful for helping to understand the complex mesh of Spanish and European rules and institutions that make up the regulatory and supervisory framework of our financial system. This presentation also affords me an excellent opportunity to reflect on the different models for the institutional organisation of financial supervision and, in particular, on the possibility of making further adjustments to the supervisory structure currently prevalent in Spain. That will be the focal point of my address.

At the same time, with the integration of prudential supervision into the central bank, the twin peaks model strengthens the capacity to preserve the stability of the financial system by promoting the necessary coordination between the management of the banking sector’s liquidity (a function which corresponds to the central bank) and the monitoring of credit institutions’ solvency soundness (which prudential supervision looks after). The predominance of the twin peaks model in the various national jurisdictions of the EU has scarcely been affected by the emergence of two new supervisory functions: the management of the resolution of non-viable institutions and the adoption of macroprudential policies to prevent the emergence of potential macro-financial imbalances and mitigate their destabilising effects. As a general rule, the orderly resolution function has been allocated within the realm of the prudential supervisor. In the case of macroprudential policy, there is broad consensus that it is the central bank that should exercise leadership of macro-financial stability committees where government representatives and other supervisors may also participate. Hence, in those EU countries where the twin peaks model has been adopted (such as the United Kingdom, France, Italy, the Netherlands and Belgium), the central bank not only acts as the prudential supervisor of all types of financial institutions, but in addition, depending  2  BIS central bankers’ speeches  on the case, and by means of special committees and inserting Chinese walls between the different functions, it also manages or leads resolution and macroprudential policy measures.