Moreover, their information on such risks is abundant, but not systematised, and is fragmentary and limited in depth. It is therefore likely that the risk of financial crises in the future will be less, but it is also possible that, if such crises emerge, they will do so with greater intensity than in the past. The improvements arising from new products and financial agents have enabled institutions to spread risks and dilute the impact that an upward revision of the risk premium might have on their balance sheets. But there is considerable uncertainty about the final destination of financial risk, since this is neither created nor destroyed, only transformed or diluted. The most desirable outcome would be for risk to end up at new institutions that can withstand negative returns in the short term without having to close out positions or cut back risk exposures. If ultimately it is pension funds that are going to retain the risk, concern should be voiced about the mismatch between increasingly sophisticated financial markets that defuse the risk in an optimal fashion and consumers whose financial knowledge has not evolved in step with market sophistication, and who remain rooted in a very elementary financial culture. 6  BIS Review 67/2007  Spanish credit institutions, with a traditional business model based on long-term relationships with retail customers, are more sheltered from this complexity than other international banks that are more active on financial markets and have deeper interactions with the markets.

But when you are part of a monetary union, the most valuable economic policy instrument is, as our own experience indicates, the deepening of reforms in order to increase the responsiveness of supply and the adaptability of the business and productive sectors to the major changes the economy is undergoing, such as globalisation and population growth. 4  BIS Review 67/2007  Specifically, the dynamism and flexibility injected into the labour market by the aforementioned phenomena of immigration and growing female participation need to be accompanied by the development of a more appropriate institutional framework, without forgoing the unquestionable achievement of good industrial relations. Despite the progress achieved by labour market reforms in recent years, the need remains to better tailor collective bargaining arrangements to the different industry- and firm-level requirements and to reduce the costs associated with permanent contracts. These measures should be complemented by others aimed at improving the quality of the labour factor, by giving greater priority to educational policy in order to redress the secondary education deficit, adapt university courses to new demands and promote effective continuous training for workers. Improving the efficiency of the economy likewise requires increasing investment in physical and technological capital, fostering innovation, pushing through privatisation where appropriate and stepping up the pace of the processes undertaken in recent years to heighten competition. The infusion of competition is particularly relevant in industries pivotal to spreading gains in efficiency to the rest of the economy, such as the network industries, the telecommunications market, the energy sector and rail transport.