and we should acknowledge that banks have proven resilient to recent exogenous shocks, from the covid - 19 crisis to the economic tensions brought about by bottlenecks, inflation driven by energy price rises as a result of the war in ukraine and the various banking crises in 2023, to give just some examples. this is undoubtedly the fruit of our work to strengthen solvency, governance and, in many cases, also adapt business models to a historically low interest rate environment that lasted for years. we should remember that the ssm was created at a very complicated time, when the consequences of the great financial crisis could still very much be felt, some countries ’ sovereign debt was coming under scrutiny and parts of the banking system were undergoing critical moments. i would like to highlight four key aspects of the last ten years : first, the balance sheet restructuring performed by banks. this has seen npls fall from nearly €1 trillion ( €989 billion ) to slightly less than €355 billion today. npl ratios have dropped from 7. 48 % to 1. 91 %. 3 one contributor to this process was supervisory pressure to improve balance sheet quality, which weighed on banks ’ profitability over a number of years when interest rates were even negative. this was particularly significant in some areas that were severely affected by the build - up of portfolios with high npl ratios. other contributory factors were banks ’ improved credit management policies and a more favourable macroeconomic environment. including amounts held by central banks. the outcome of this exercise, and of containing other costs, was that banking profitability remained at between 5 % and 6 %, in spite of such an adverse interest rate environment. as we have pointed out before, the normalisation of monetary policy has strongly driven bank profitability in the last two years. second, and as a result of the above, european banking solvency has also been strengthened over the last decade. the cet1 ratio rose from 12. 7 % in 2015 q2 to 15. 7 % in 2024 q1. the regulatory changes to the solvency framework made in the light of the great financial crisis drove this significant increase. nevertheless, the leverage ratio saw a more modest rise, from 5. 04 % at end - 2016 to 5. 71 % in 2024 q2. the third aspect to consider is liquidity. here, banks have also strengthened their liquidity positions, with the lcr rising from 138 % in 2015 to 158 %

24. 07. 2024 ten years of the single supervisory mechanism : key aspects of modern banking supervision * kpmg madrid margarita delgado acting governor * lenglish translation from the original in spanish. e good morning. welcome to this celebration of the tenth anniversary of the single supervisory mechanism ( ssm ). this is a landmark occasion : a chance to, first of all, cast our eyes back and look at what has happened in the banking sector over the last ten years and, second, reflect on what the near future may hold for us in supervision. this anniversary represents, then, an opportunity to take stock of the current situation of the banking sector, how it has been affected by the new supervisory model implemented a decade ago and, above all, what lessons can we learn to continue improving, thereby strengthening our financial system? i will divide my speech today into three parts. i will begin by considering the current situation of the banking sector under direct ssm supervision, before looking back at what has been achieved in these ten years and then finishing with my perspective on the challenges facing supervision in the future. first, we must acknowledge that the banking sector is in generally good health, as indicated by the main ratios we use to measure the most significant risks. beginning with credit risk, the non - performing loans ( npl ) ratio stood at 2. 31 % 1 in 2024 q1, according to the latest report by the european central bank ( ecb ), with npls amounting to €354. 8 billion, which was a slight increase, of 1 basis point ( bp ), over the previous quarter, although it remains at a low level historically speaking, as we will see later. these figures are the eurosystem average but, as usual, vary across countries. thus, for example, npl ratios in the large economies range from 3. 26 % in spain to 1. 55 % in the netherlands. the extremes are found in greece ( 4. 60 % ) and latvia ( 0. 54 % ). the range narrows if analysed by business model, with ratios between 3. 07 %, for banks deemed to be diversified lenders, and 1. 17 %, for custodian banks. excluding central bank exposures. french and german banks have the largest npl portfolios by volume, which is understandable given their joint weights in the banking system as a whole. indeed, french banks hold 34. 8 % of all loans by euro area