. those considered too important to fail due to their size, the level of complexity of their operations or their interconnectedness with other financial system participants. in future, these banks will have to meet greater regulatory and supervisory demands, which will need to be adapted to the type of activity, complexity and structure of each bank. headway has been made and is being made in many other areas, such as remuneration in the financial sector, the regulation of rating agencies, etc. generally speaking, spain has much to learn from other countries about economic policies. the clearest and most pressing example, in light of the economic and social consequences of the burgeoning number of jobless spaniards, is the employment and labour market policies of those countries which, even at the height of crises, keep unemployment rates low. however, within the realm of financial regulation and supervision policies, the opposite is the case : our supervisory arrangements are being closely studied for reforms in other countries. the ingenious idea of governor rojo and his team to set in place a countercyclical mechanism in order to try and soften credit growth or at least mitigate the adverse consequences of its cyclical behaviour on the banking system was a forerunner of the countercyclical capital buffers envisaged in the basel iii accord. the constraints on complex products and the obligation to consolidate are further examples of rules or guidelines that are characteristic of spanish banking supervision and regulation and which fully coincide with the direction in which global financial system reform is advancing. spain ’ s approach to restructuring its banking sector has demonstrable advantages. the process has been undertaken using the frob ( fund for the orderly restructuring of the banking sector ), which was set up following parliamentary approval over 18 months ago and has since overseen numerous integration processes between savings banks that have reduced their number from 45 to 17. the design of the frob was based around a twopronged approach. first, it was geared to supporting banks which, while viable, required restructuring to ensure their ability to resume a path of sustainable profitability, by reinforcing their solvency with public funds. significantly, in certain countries where the need for a similar instrument has been acknowledged, this has not yet been created. second, the frob involved giving the banco de espana wide - ranging powers to swiftly and effectively take control and resolve the problems of those banks that are not viable. rounding off the remit of the frob has been the approval of the reform of the legal

impairment. they also have to give details of their retail mortgage portfolio, including the related ltv ratios and the percentages of doubtful assets. finally, they must assess their market funding needs and the short -, medium - and long - term strategies they have implemented. all this is necessary because when reality is perceived as being worse than it actually is, the best possible response is to explain it in the finest detail. a further lesson drawn from the conduct of markets is that they do not like uncertainty. as top film scriptwriters know, filmgoers are happiest when they can predict a little bit of what ’ s going to happen. music composers also know this. the more unpredictable a film or a musical composition is, the more unsatisfied viewers and listeners are. in this debt crisis, in addition to the responsibility of the countries subjected to market mistrust, the lack of coordination among european union leaders has also played a key role. in the public eye, the latter have aired substantial differences and have sometimes done so at the worst possible time in the crisis, thereby contributing to compounding the problems. i recall a journalist interviewing an analyst in a us tv programme some weeks back. the analysts set about discussing how europe ’ s sovereign debt problems were the main source of instability at present worldwide. the journalists asked him how it was possible that, among the markets ’ reasons for nervousness, he had not even mentioned the north korean bombing incident the previous day. and the analyst replied : “ look, markets like predictable. and the north korean government is much more predictable than european politicians ”. what i have said about european union institutions can also be extended to institutions within individual countries, where it is not only important what the central government says or does, but also what the regional governments, the opposition and, generally, all relevant economic agents do or say. and that ’ s something else we ’ ve learned about markets : they see us from afar and don ’ t distinguish what we distinguish within. specifically, in our case, they do not always draw a distinction between regional and central governments, or between the government and the opposition. what they see is, simply, spain. taking these lessons on market behaviour to heart is very important for all countries, but all the more so in a country such as spain which, owing to the systematic and growing build - up of current account deficits since 1996, has had to resort to external financing. accordingly, it is vital to transmit