Javier Aríztegui: Savings bank restructuring and institutional protection schemes Speech by Mr Javier Aríztegui, Deputy Governor of the Bank of Spain, at the conference organised by Caja Granada, Granada, 17 December 2010. *  *  *  It is a pleasure for me to be able to share with savings banks professionals and Spanish financial system specialists some reflections on what are known as “Institutional Protection Schemes” (IPSs). And it is all the more satisfying to do so in a city as magnificent as that hosting the event today. My thanks, then, to Caja Granada for kindly inviting me to participate in the closing of this conference. The year 2010 now drawing to a close has been a difficult one for the Spanish banking system, whose activity has continued to unfold in a sluggish economic setting marked by financial markets that have not yet managed to attain the degree of stability and confidence needed. It has thus been a year replete with management challenges, intellectual debates and legislative initiatives. But if we must choose one specific milestone marking it above all others, 2010 has been the year of merger agreements between savings banks, in possibly the most extensive banking concentration process ever undertaken in our country. A sizeable portion of these agreements has taken the form of Institutional Protection Schemes or – to make a further addition to the plethora of acronyms and initials characterising today’s financial jargon – IPSs.

In addition, there has been an ongoing convergence in the financial sector as traditional boundaries continue to be eroded by changes in institutional structures, shifting legal barriers and product innovations. The proliferation of conglomerate arrangements have also increased the need for more consistent regulatory approaches across industry boundaries to reduce the prospect of regulatory arbitrage and inefficiencies. France and Germany have recently made announcements on the consideration to place the supervisory responsibility of the insurance sector with the Central Bank. This has however, drawn some resistance from insurers on grounds that" the concentration of responsibilities would create new conflicts of interest for the financial sector". Bank Negara Malaysia has been the supervisory authority of the banking industry since its establishment in 1959 and for the insurance industry since 1988. This integrated approach within the Central Bank has enabled us to form a more complete assessment of the risks to financial stability while ensuring consistency in the treatment of risks across the different industries to avert risks to the overall financial stability. The rapid pace of changes in the global economic and financial environment requires industry players to continually upgrade their expertise. Cooperation in this area between industry players can contribute towards bringing the insurance industry to the next frontier. Since its establishment in 1964, the Federation of Afro-Asian Insurers and Reinsurers has fostered a strong cooperation among insurance industry players in Africa and Asia. Such expertise may indeed be tapped through such regional platforms, bringing with it mutual benefit to the insurance industry in both markets.