united states, where the latest inflation figures have been surprisingly on the downside and wage pressures are also low. but in the euro area an added difficulty is the absence of mechanisms that provide for the support of other economic policies to monetary policy. and on this point we must look at fiscal policy. fiscal policy in the eu in the case of fiscal policy, it is true that despite the improvement recorded in the euro area in recent years, the high levels of public debt leave little leeway in various countries to pursue an expansionary policy. these economies, spain among them, should see through the process of fiscal consolidation, harnessing the room for manoeuvre that may result from changes in the composition of taxes towards figures more conducive to growth and a greater gearing of public spending towards investment, education and innovation. but nor are there mechanisms in the european framework to encourage economies that have a favourable budgetary situation and fiscal space to use them if the circumstances of the area as a whole so require. euro area - wide fiscal policy is, at present, the result of the sum of national policies. when designing policy conduct, there are no mechanisms conducive to countries internalising the benefits of achieving a suitable economic policy mix for the area as a whole ; and this especially at a time, such as the present, when the existence of a very accommodative monetary policy means that both the national effects and the impact on other countries associated with a specific fiscal impulse are greater. against this backdrop, and as highlighted in the recent discussion paper on the deepening of emu published by the european commission, it would be necessary in the medium term to develop a fiscal capacity for the euro area as a whole that contributed to supporting monetary policy. 6 / 7 the estimates detailed in this year ’ s annual report of the banco de espana suggest that a study could be conducted of a common fiscal instrument, managed at the supranational level, but which does not entail permanent transfers between countries and which, without committing a high volume of funds ( around 1 % of gdp ), provides the euro area with a fiscal stabilisation capacity similar to that other federal states have. it also appears necessary to seize the opportunity afforded by the favourable economic juncture and the overcoming of some of the political risks to complete the reform of european governance, along the lines considered by the five presidents ’ report published in 2015 and the recent discussion paper by the european commission. likewise, further

reducing the probability of bank failures and systemic crises. note that i deliberately use the word “ reduce ”. eliminating all instability would be neither feasible nor desirable. the resolution measures aim at reducing the negative consequences in the event that failures or systemic crises occur – despite hopefully greater resilience in the future. in what follows, it is useful to bear in mind the extraordinary situation we face here in switzerland. in international comparison, our banking sector is very large relative to our economy. currently, total assets of the swiss banking sector exceed seven times gdp. furthermore, the swiss banking sector is highly concentrated. based on total assets, the two big banks, ubs and credit suisse, have a market share of more than two - thirds. these exceptional orders of magnitude clearly necessitate prudent decision - making when determining the appropriate regulatory framework for banks in switzerland. preventive measures let me first turn to the preventive measures. these measures should focus on strengthening the shock absorbers of the financial system and thereby making the system more resilient. in the context of the most significant banks, this essentially means that they have to hold substantially more and better quality capital and liquidity. strengthening capital requirements as we all know, the crisis has revealed fundamental weaknesses in existing capital requirements. other important reports include “ financial reform : a framework for financial stability ” by the group of 30, and “ the global financial crisis : a plan for regulatory reform ”, committee on capital markets regulation, may 2009. “ restoring confidence, creating resilience : an industry perspective on the future of international financial regulation and the search for stability ”, institute of international finance, july 2009. speech by e. gerald corrigan, managing director at goldman sachs, at the presidential symposium, university of rochester, 10 october 2009. to address these weaknesses, a considerable amount of work has already been done and is still underway in the fsb and, crucially, in a number of working groups of the basel committee on banking supervision ( bcbs ). 7 in line with, and in full support of these efforts, the swiss authorities are convinced that a more robust capital framework needs to be built around the following features : first, the amount and quality of capital need to be increased very substantially. in the medium term, this will be feasible without giving rise to drastic adjustments at banks that might be harmful to the overall economy. the key to this will be a sufficiently long time horizon and, crucially, more discipline in retaining earnings