javier ariztegui : the financial crisis and the restructuring of the spanish banking system speech by mr javier ariztegui, deputy governor of the bank of spain, at the apie ( the spanish association of economics journalists ) – uimp ( menendez pelayo university ) course, santander, 17 june 2011. * * * let me begin by thanking the apie ( the spanish association of economics journalists ) and the menendez pelayo university for inviting me to deliver the closing address at this seminar, which has discussed matters of great interest for our economy and financial system. this is the third year i have come to santander for this session, and the second year running that i will be briefly reflecting on the financial crisis and the restructuring of the banking system. that i should be here again is no strange occurrence. indeed, it was foreseen by the organisers since we are experiencing the deepest and most extensive crisis in recent decades, and we face a far - reaching restructuring and reform of savings banks. but my address today is from a different perspective than that of my last visit. in june 2010 the royal decree - law that created the fund for the orderly restructuring of the banking sector ( frob by its acronym ) had been in force for a year. one of its aims was to boost integration processes to create sounder and more efficient institutions. at that time the main negotiations between savings banks to draw up the new map of the sector had already taken place, and the frob had committed its first aid in this connection. but some of the key elements to entrench the reforms and restore external confidence in our financial system were still pending. in fact, only a month later, in july 2010, the results of the stress tests of credit institutions, co - ordinated at the european level, were published ; the banco de espana agreed to amend the regime governing accounting provisions ; and the government approved a key reform on the legal regime of savings banks. then, in february 2011, the royal decree - law on the reinforcement of the financial system was enacted, and its rules are currently being applied. this year we can roundly state that the restructuring of savings banks has moved into its final stage. thereafter, we will have a smaller set of institutions ( from 45 original savings banks there are now 18 ) and one that is more efficient and better capitalised, capable, along with the rest of our banking system, of providing the intermediation services our economy

, the economic and financial situation of some emerging markets is under pressure as a result, among other factors, of the combination of monetary policy normalisation and strong fiscal stimulus in the united states. last summer financial conditions in most emerging market economies were tightened, giving rise to considerable outflows and steep exchange rate depreciations, particularly in argentina and turkey. this sharp market reaction should be a reminder of the risks that the normalisation of monetary policy at the global level could entail, in particular for those countries that have accumulated macroeconomic imbalances. 3 / 5 second, a potential increase in economic and geopolitical uncertainty stemming from escalating trade tensions could adversely impact global growth. in this regard, the latest forecasts by international organisations already reflect some impact and, indeed, global growth and global trade has already begun to lose momentum. in addition to protectionist escalation, sources of geopolitical risk have also grown in europe as a result of brexit negotiations and the fiscal situation in italy. but how have financial conditions actually evolved in this new scenario? until very recently, financial conditions in advanced economies remained loose, while conditions in emerging markets had tightened. interestingly, us interest rates have increased at the longer maturities, but still modestly. nevertheless, a materialisation of current risks might lead to a “ snap - back ” scenario of sharply rising long - run yields, driven by a sudden decompression of term premia, that might amplify market stress and harm the economy. in this context of growing near - term risks, a better understanding of volatility, the second topic of the conference, is also crucial for central banks, given the implications for monetary policies and financial stability. the period of ultra - loose monetary policy has driven a prolonged period of low volatilities. nevertheless, global markets could be entering a new phase of higher volatility or more frequent short - lived bouts of instability as interest rates increase. moreover, volatility markets – in particular, volatility - linked derivatives – have become more popular in this low - uncertainty environment. negative surprises in these markets might amplify shocks and impair the functioning of key markets, potentially even affecting the financing of the real economy. the surge in volatility witnessed last february illustrates this point. central bank policies are affected by this scenario in at least two dimensions. first, it makes more challenging the definition of an adequate monetary policy normalisation path