which has been underpinned by the reforms already pushed through, which are contributing to correcting the imbalances built up during the upswing that ended in 2008. however, and this is the third factor, the favourable developments in the spanish banking sector cannot be understood without considering the transformation it has undergone. this has involved the recapitalisation and restructuring of bank balance sheets ; downsizing, entailing reductions in staff and in bank offices ; and an overhaul of the savings bank sector, improving the corporate governance structure and resolving the situation whereby it was impossible for these institutions to tap the capital market for funds. these favourable developments are apparent in the behaviour of certain variables, which i shall briefly review. i. non - performing loans non - performing loans ( npls ) as a proportion of lending to the resident private sector in spain have been falling since early 2014. on the preliminary data for february, the latest figures available, the npl ratio for spanish banks as a whole declined to 12. 6 %, the lowest proportion for the past 18 months. this improved asset performance is the case both for households and for non - financial corporations. ii. funding spanish banks have improved their access to both retail and wholesale funding, and have significantly reduced their recourse to the liquidity provided by the eurosystem. nonetheless, recourse to the eurosystem remains high given the limited activity on interbank markets. the trajectory of deposits in 2014 and the still - declining trend of credit have allowed the narrowing of banks ’ loan - deposit gap to continue. the gap has narrowed by almost 40 % since 2007. bis central bankers ’ speeches iii. profitability the capacity of banks to generate profit reflects their resilience in the face of potential difficulties and, at the same time, their possibilities of developing banking business in a sustainable fashion. figures for the first nine months of 2014 confirm that the sector has left behind the losses recorded in 2012. this better performance is underpinned by both the reduction in operating expenses and the lower provisioning needs derived from asset value adjustments. net interest income, under downward pressure from limited business activity and low interest rates, increased moderately in 2014 compared with the same period in 2013. that said, this recovery is as yet modest and the downside pressures on the statement of income persist, meaning banks must persevere in containing their operating costs. iv. solvency attesting to spanish banks ’ solvency were the results of the stress test conducted before

##udential supervision. this latter directive requires, in turn, national transposition. the three major avenues of regulatory reform under basel iii and their transposition to the european legislative framework, with consequences for foreign trade - related transactions, are the treatment of credit risk for solvency purposes, the leverage ratio ( the ratio of topquality capital to total assets ) and liquidity ratios. the discussions on solvency have been concluded, while certain aspects of the leverage and liquidity ratios remain subject to review. as regards the treatment of credit risk, basel iii recognises a lower foreign trade financing risk than basel ii. as a result, the consumption of capital in these transactions is lower than in other analogous short - term financing transactions. these changes have been transposed into european prudential regulations. bis central bankers ’ speeches lastly, in connection with liquidity management and supervision, the basel committee ( and, to a greater extent, european legislation ) has incorporated into the determination of the short - term liquidity ratio a specific treatment for foreign trade - related transactions with a residual maturity of 30 days or less. the potential adverse effect on the availability of financing for foreign trade derived from the obligation to maintain sufficient, quality liquid assets is thereby mitigated. in an economy with a developed banking system such as ours, financing for the internationalisation of the spanish economy is largely conditional on developments at the international level. the best policy for promoting the financing of the international expansion of our companies is to ensure the financial stability and soundness of the spanish financial and banking system. bis central bankers ’ speeches