miguel fernandez ordonez : the restructuring of the financial system opening speech by mr miguel fernandez ordonez, governor of the bank of spain, at the xvii meeting on the financial sector / deloitte - abc, madrid, 13 april 2010. * * * good morning. let me first thank abc and deloitte for the opportunity to address such a select audience as that gathered here today. i have tried to explain from the outset of the crisis that, although it may have compounded the main problems besetting our economy, these are specifically spanish problems. accordingly, their solution unavoidably involves adopting domestic measures without counting on an improvement in the external environment to resolve them for us. among these problems is the necessary restructuring of the spanish banking system. this sector, which grew in parallel with the extraordinary real estate expansion of the past 15 years, now shows overcapacity and insufficient capitalisation in the case of certain institutions, meaning re - sizing and appropriate restructuring are needed. last year, in this same forum, i referred to the need for banks to be aware of the situation facing them and to set about the task at hand. today, with few exceptions, i believe they are doing their homework. regarding the restructuring of the financial system, the government and parliament too have done what they had to, and correctly so in my view. on one hand, formulas such as nationalisations, “ bad banks ” and capital injections without requiring that capacity be reduced have been rejected. such formulas were probably unavoidable in countries that have seen the bulk of their banking systems collapse, but are absolutely inappropriate for spain ’ s circumstances, where most of the sector is essentially healthy. on the other, the capacity of the banco de espana has been reinforced to act effectively when it is necessary to take control of banks and, in turn, an appropriate framework has been set in place so that those banks that so require may access the funds needed to restructure. even if still currently viable, they are encouraged in this way to go ahead with restructuring, which allows them to be prepared to lend without problems once the recovery arrives and the current declining pattern of the demand for credit turns around. these measures – implemented in the royal decree law creating the frob ( fund for the orderly restructuring of banks ) – have been adopted with a broad parliamentary consensus, enjoying the support of the two main parties, in a similar fashion to the consensus behind the swift response of our authorities

is one of the most highly cited young macroeconomists in academia, and his research interests comprise macroeconomics, labour economics, and international finance. his latest research has focused on topics such as the global decline in labour's share of income, productivity and capital flows in southern europe, and the effects of unemployment insurance policy on macroeconomic outcomes. as a macroeconomist whose work is grounded in thorough analysis, and a profound knowledge of models and data, he also takes into account the policy implications of the findings of his research. this is an important factor as he is a pioneer who has done groundbreaking work, and his research frequently encourages others. in this respect his work on the global decline in labour ’ s share of income has prompted a number of papers from academia and different institutions so as to understand this change over time and its implications for income distribution and productivity. similarly, his work on capital allocation and productivity in southern europe has been widely influential. mr. karabarbounis, congratulations on my behalf and on that of the banco de espana.