The ECB’s asset reinvestment policy, the guiding principles of which were readjusted yesterday, aims to preserve the monetary stimulus provided by the asset purchase programme through full reinvestment of the assets on the programme’s portfolio as they mature. In short, monetary policy will continue to have tools with which to tackle future economic and financial crises, although these tools naturally have their limitations. Therefore, as the Governing Council of the ECB has been saying in recent years, rather than overemphasising the role of these tools, they need to be complemented by the implementation of structural reforms and fiscal policies to foster growth. Spanish economic policy: progress made and challenges The Spanish economy has been on a growth path since late 2013 and GDP overtook its pre-crisis levels in mid-2017. A number of structural reforms implemented during the recession contributed to this dynamism. On the domestic front, these include labour market reform, the balance-sheet clean-up and restructuring of credit institutions, pension reform and fiscal consolidation. These reforms have undoubtedly helped largely correct some of the Spanish economy’s main imbalances in the pre-crisis period: in particular, high levels of private sector debt, low competitiveness, the excessive current account imbalance and the excessive weight of the real-estate sector. Similarly, economic policy measures have enabled progress to be made on correcting the problems faced by the financial sector during the worst of the recent crisis. Nevertheless, the recovery has also benefited from a series of factors exogenous to domestic economic policy with varying degrees of persistence.

Some of the key reforms introduced include an increase in the quantity and quality of minimum regulatory capital and the creation of capital buffers. New prudential requirements have also been introduced, such as the limits on large exposures, a maximum leverage ratio and two liquidity requirements, at the same time as the reform of the frameworks for evaluating market risk and securitisations has been launched. In addition, last December, a second wave of reforms introduced within the framework of the Basel Accords was completed. The focus of these measures has been the calculation 3/14  of risk-weighted assets, i.e. the denominator of the capital ratio, in order to improve the comparability of capital ratios across banks and jurisdictions. Another lesson of the crisis was that it is necessary to prevent and mitigate the effects of an excessive build-up of risk in the financial system as a whole. An exclusively microprudential based regulatory framework is clearly not sufficient to achieve this. New instruments were considered necessary to help moderate and address cyclical systemic risks (such as, for example, those associated with the credit cycle) and cross-sectional systemic risks (for example, those linked to the risk arising from, among other aspects, the size, complexity and density of the interconnections between financial institutions). With regard to cyclical systemic risks, a countercyclical capital buffer has been introduced, with a view to preventing risks arising from excessive credit growth at the aggregate level.