We are analysing such  4  See Federal Reserve Board announces the results from the review of the supervision and regulation of Silicon Valley Bank, led by Vice Chair for Supervision Barr, FRB press release, 28 April 2023. 5  Basel Committee to review recent market developments, advances work on climate-related financial risks, and reviews Basel Core Principles, BIS press release, 23 March 2023. 6 7  Valuations are based on the MSCI European Quarterly Property Index. See Recommendation of the European Systemic Risk Board of 1 December 2022 on vulnerabilities in the commercial real estate sector in the European Economic Area (ESRB/2022/9). episodes with great care because vulnerabilities in non-bank financial intermediaries can result in procyclical selling behaviour that would amplify asset price falls. In this context, non-bank financial institutions need to ensure that their risk management practices adequately reflect the risks they might face. For example, investment funds need to monitor and address possible excessive liquidity mismatches or leverage. Insurers need to pay close attention to market risk. They also need to consider that margin calls on derivative positions or lapses of contracts can expose them to liquidity risk. Central counterparties (CCPs), clearing members and their clients need to be mindful that the reduction in counterparty credit risk brought about through regular margining can result in liquidity risk being transmitted through the financial system. They need to monitor derivative exposures, and address concentration risk and procyclicality in margining practices along the chain of CCPs, clearing members and their clients.

Similarly, the Circular will determine the circumstances in which bank foundations will be compelled to diversify their investments and, if appropriate, to relinquish control of the credit institutions which they own through the corresponding divestment. I trust that the period for public consultation of the Circular will open shortly. Second, the new European framework of resolution is already prompting, in most national jurisdictions, reflection on the institutional architecture of bank resolution. In the past, resolution agreements have required close collaboration between the various authorities involved in the process; namely, the supervisor, the resolution authority, if any, and the governments concerned insofar as the resolution has habitually required the use of substantial public funds. The experience in our country has been no exception. The current distribution of functions between the Banco de España and the FROB – whose Governing Committee includes representatives of the Ministry of Economic Affairs and Competitiveness, the Ministry of Financial Affairs and Public Administration, and the Banco de España – has required that the two institutions were intensely involved in the resolution processes. Thus, while the supervisor is responsible for initiating the resolution process of an institution and approving the resolution plans, the FROB must prepare these plans, put them into practice and, in sum, manage the State’s ownership interest in those institutions that received financial aid, including any future divestment. Consequently, the coordination between the Banco de España and the FROB has been pivotal in ensuring effective management of the crisis.