BIS Review 7/2001  9  Chart 12 shows movements in the long-term forward rate differential against Germany. A positive forward rate differential reflects to some extent a relatively small market for Norwegian government bonds compared with other countries. The yield on Norwegian government bonds is therefore normally higher than the yield on corresponding German bonds in order to compensate for liquidity risk. The forward rate differential is generally low, indicating that in the long run inflation in Norway is not expected to be substantially higher than in euro countries. As with the information provided in Consensus Forecasts, forward rates also indicate that participants in financial markets have a reasonable degree of confidence in monetary policy. The degree of confidence in monetary policy is also reflected in the foreign exchange market. Waning confidence results in a weaker and more unstable krone exchange rate. Chart 13 shows developments in the market's evaluation of the probability distribution for the krone exchange rate one month ahead. A flat curve reflects considerable uncertainty. The curves, which are derived from prices for currency options, show that the uncertainty surrounding the future krone exchange rate is considerably less today than at the beginning of 1999. Both surveys and financial indicators, such as forward rates and prices for currency options, can provide information about confidence in monetary policy. Even though such information is useful, it does not provide a sufficient basis for evaluating whether monetary policy has been successful in relation to the objective set out in the Exchange Rate Regulation.

BIS central bankers’ speeches  3  The consolidated profits of Spanish banks in the first half of 2015 also contributed to this strength, amounting to € billion, 37% up on the previous year. The improvement in the consolidated result has also translated into a rise in profitability ratios, both in terms of assets (ROA) and equity (ROE). However, this improvement was mainly underpinned by activity abroad, the weight of which in the total business of Spanish deposit institutions increased compared to domestic business. The return on equity (ROE) has resumed positive levels, around 5%, though we are still some way off average historical levels and it should be noted they are below cost-of-capital estimates. In a setting characterised by the persistence of very low interest rates, one of the main challenges banks face is to maintain adequate profitability levels, especially at a time when the dynamism of banking activity is still limited and the volume of non-performing loans (NPLs) and foreclosures remains high. But we should highlight here the adjustments banks have been making to the volume of NPLs and foreclosures, which have been declining continuously since early 2014. Final remarks The Spanish economy is overcoming the most serious crisis, I would say, without fear of exaggerating, of those it has experienced in recent decades since the 1959 Stabilisation Plan – almost 60 years ago – paved the way for strong development and for reforms that gave momentum to our integration into the international economy.