The growing importance of transparency and corporate responsibility is not restricted to the accounting realm. Indeed, corporate governance is a key aspect in all financial systems. This is acknowledged by the Basel Committee on Banking Supervision, which has approved a specific guide for deposit institutions. The guide seeks to complement other codes, placing particular emphasis on organisational, risk-control and transparency aspects. Growing cross-industry and cross-country integration also has consequences for supervisors, who can increasingly less exercise their powers in isolation. Accordingly, national supervisory activity should  10  BIS Review 60/2006  best form part of the set of initiatives and activities at the international level, especially the activities of the Basel Committee on Banking Supervision and the Committee of European Banking Supervisors, which were both chaired in 2005 by the Banco de España. Once the chapter dedicated to the capital framework and the trading book was concluded in July 2005, both Committees directed their efforts at supervisory co-operation and at enhancing consistency of implementation, thus supporting the idea that a regulatory pause might improve the quality of implementation of this regulation. The call for regulatory convergence to be accompanied by a convergence of supervisory practices is particularly intense in the EU. Fora such as the Basel Committee’s AIG (Accord Implementation Group) or the CEBS (Committee of European Banking Supervisors) in the EU are a response to this call.

Against this background, 2005 was marked by the continuing strong growth of financing to the resident private sector, especially the financing of activities linked to the property market. Nonetheless, the change in the monetary policy stance and the increased volatility of financial markets in recent weeks have renewed doubts about the continuity of this setting. The growth of mortgage credit has been accompanied by the emergence of new bank products. It has thus been possible recently to observe a lengthening of the terms at which mortgages are granted, to limits considerably in excess of those banks are accustomed to handling, and greater flexibility in the deferral of principal and interest payments, as well as the possibility of being able to draw automatically on amounts repaid in order to finance other needs. These financial innovations, which are characteristic of mature financial markets, enable financial institutions to satisfy customer requirements with greater flexibility, and the possibilities of financing individuals and firms may be increased. However, substantial extra efforts are required by bank managers to properly measure and control the additional factors of risk and also to provide customers with the necessary information so that they may assess their ability to pay under various alternative scenarios. The increase in financing granted to property market-related activities is not confined to that extended to households for house purchases; financing extended to construction and property development companies has also grown notably. The degree of concentration of entities' credit portfolios in construction and property development activities increased once again in 2005.