by all the government authorities involved, management cooperation, the reaction of the trade unions and understanding on the part of the general public, there have been no queues or panic at branches and there have clearly been fewer withdrawals of deposits than foreseen. having briefly outlined ccm ’ s current position, let me move on to the ultimate aim of the banco de espana ’ s supervisory decisions. while seemingly obvious, the supervisor ’ s aims are to protect depositors ’ savings and creditors, to avoid market turmoil and to preserve the stability of the financial system as a whole. the objective of the central bank ’ s control is to stabilise ccm, to avoid a liquidity collapse and to manage the institution for as short a time as possible with a view to finding an orderly solution. ultimately, the viability of ccm ’ s future business may be achieved in different ways ( for example, through a merger with other credit institutions ), with the banco de espana currently not ruling out any options. the response to these options will be swift, but not immediate, and will require the collaboration of authorities, financial institutions, employees and creditors. i would not like to forgo the opportunity of appearing before this committee without highlighting some of the messages recently conveyed by the banco de espana. firstly, i would like to reiterate that involving savings banks in the political debate makes it immensely difficult to find flexible and effective solutions. opinions become distorted, suspicions, demands and expectations of the parties involved grow and solutions become increasingly complicated. we should not forget that past experience in spain and abroad shows that prudence and discretion are prerequisites for reducing the costs of possible solutions for troubled institutions. otherwise, we will make the authorities work more difficult and, ultimately, taxpayers will pay a higher price. in finding a solution to the difficulties encountered by ccm, the banco de espana has adhered to its tradition of adopting decisions based solely on the objectives of preserving the stability of our financial system, minimising the cost in terms of public funds and maintaining the availability of sufficient financial services. to conclude, i have personally conveyed to the government and to the main opposition party the need for certain regulatory changes that might notably improve finding solutions in keeping with the principles informing our actions to date, which as you are well aware, were backed by a recently approved parliamentary motion. the purpose of my testimony today is not to debate what must be done in future, since that is evidently the primary responsibility of the government

measures in relation to ccm and its current situation. before that, however, i should highlight what is a primordial starting point : ccm is a credit institution with a positive net worth. that is to say, and in the vernacular of the press, the institution has no " hole " in its balance sheet. yet this does not mean it is not facing serious problems, the cause of which must be sought in an inappropriate management of risk and a forceful business expansion – especially in the real estate sector – funded largely through resort to the international bond markets, generating sizable imbalances. past experience shows that these credit expansion policies are very dangerous if unaccompanied by the related risk control measures since, generally, they usually entail a relaxing of credit standards. responsibility for these decisions falls on ccm's previous directors. given ccm's problems, the banco de espana ’ s supervisors had considered the institution worthy of " special monitoring ". that justifies the constant vigilance of developments in ccm's risks, solvency, profitability and liquidity, since it was considered to be particularly vulnerable to a downturn in the business cycle and, in particular, in the real estate market. in the past year, ccm was subject to two inspections, with the second review based on year - end figures for 2008 currently drawing to a close. allow me to focus on the recommendations made by the central bank in its supervisory capacity in recent years. back in 2003, the recommendations detailed further to inspection called on ccm's directors, as was the case at other institutions, to reflect on the amounts assigned to funding real estate development activity, owing to the high risk this entailed. these concerns were taken into account in the ongoing monitoring of the institution and were reiterated in the letter of requirements following the first inspection carried out in 2008. these requirements referred to a sizeable volume of exposures in which some degree of impairment or weakness was apparent, denoting a deterioration in the quality of lending, which was accounted for by the global financial crisis and its impact on developments in the real estate sector and by other specific factors. the letter of requirements urged the board of directors to analyse risk policies and decisions, and to urgently apply the measures needed for a more effective management of bad debts, demanding as at that date an increase in write - downs. all these recommendations and requirements simply reflected the supervisor ’ s concern about credit - expansion and risk - management policies