The introduction of macroprudential instruments to complement the stabilising capacity of monetary and fiscal policies is probably one of the most significant advances in the wake of the international financial crisis. For the countries belonging to a monetary union, the introduction of these tools is particularly important. This is because it is one of the few instruments available nationally to ensure the stability of the domestic financial system. In my opinion, macroprudential policy has a dual role to play in the current setting. First, continuing low or even negative interest rates over an extended period may have adverse effects on financial stability. Macroprudential policy should be primarily entrusted with reacting if some of these risks emerge, actively combating potential excessive debt growth and protecting financial institutions against the hypothetical materialisation of these  12  See Chapter 4, “Fiscal policy in the euro area”, in the Annual Report 2016, Banco de España. 13  See Arce et al. (2016), “Policy spillovers and synergies in a monetary union”, International Journal of Central Banking, 12(3), September, pp. 219-277. 14  See Chapter 4, “Fiscal policy in the euro area”, in the Annual Report 2016, Banco de España. 12/16  risks. This policy action should affect both the banking sector and the non-bank financial sector, depending on where the signs of exuberance are perceived. Second, some macroprudential instruments, such as the countercyclical capital buffer (CCyB), can be used to build up capital buffers at financial institutions in times of plenty that can be deployed when conditions worsen.

Both these problems restrain the attraction of foreign investments and impede the country’s development. Third, efficiency in using the economy funds should be improved even at micro level. This implies the need for improving private businesses’ management and control systems, enhancing analytic and forecasting capabilities, as well as transparency. Allow me to further deal with some of the above-mentioned issues. Stable economic development of the country As we have continuously underlined in our periodical reports, the economic growth over the recent years has been strongly supported by the banking system lending. The growth of banking lending has provided an impulse of about 7 percentage points of GDP in the last five years, making a pronounced and evident contribution to the growth of consumption and investments in economy. Their growth has provided room for expanding the production basis and improving the welfare. However, it has also generated macro and microeconomic imbalances. At macroeconomic level, the high consumption and investments were followed by increasing inflationary pressures and higher trade and current account deficit. These signs of overheating were clear signals that that level of consumption could not be kept for a long time, hence calling for controlling measures by the monetary authority. This is also the key to understand our prudent monetary policy during the period 2006–2008. The institutional investment we have made during these years in terms of consolidating macroeconomic and financial stability was rewarded with a much more moderate and milder impact of the global crisis than in the regional countries.