momentum of the european economy, the attempts of public authorities to alleviate its most painful effects on society and the consequences of states ’ efforts to avoid the collapse of the financial system. how have these three successive phases affected the spanish banking system? spanish banks held up reasonably well in the first phase of the crisis. on various occasions, the reasons why they performed differently have been pointed out. on the one hand, their business is “ traditional retail banking ”, which hardly involves structured products that can ultimately become “ toxic ”. on the other, spanish banking regulation and supervision retained its conservative stance and did not follow the international trend which advocated low - intensity regulation and supervision. well - known examples are “ dynamic provisions ” and the compulsory consolidation of any “ off - balance - sheet structure ” that might involve a risk. nonetheless, our banking system has not been insulated from the consequences of the crisis. the sector built up imbalances during the long twelve - year expansionary period of our economy from 1995 to 2006. the interplay of these sectoral imbalances, which began to be tackled at end - 2006 with the outbreak of the international crisis, suffices to explain the resulting impact. on the assets side, there was a strong, sustained increase in lending. coming in unison with one of the defining features of the spanish economy ’ s growth pattern, the exposure to real estate developers turned out to be excessive, all the more so considering that it is a highly cyclical activity which is currently contracting sharply. in this respect, it should be pointed out that in spain there are fundamental differences between credit for real estate development and that extended to households for house purchase. thus, while the former shows, as i have said, pronounced cyclical behaviour, retail mortgage lending is the type of credit which has the lowest default rates during recessions. this is so not only now, when the doubtful assets ratio for deposit institutions as a whole stands at 2. 5 %, approximately 3. 5 pp below that of credit to the private sector, but also in the past. for instance, in 1993, when the unemployment rate amply exceeded 20 % and interest rates were substantially higher than at present, the doubtful assets ratio for house purchase loans was approximately 4. 5 pp lower than that for total credit to the private sector. the retail mortgage business in spain is characterised by its simplicity, by having avoided innovations that tend to lower banks ’ incentives to manage borrowers properly, and by the incentives to build relationships

the banco de espana also ranks first for this ratio ( i. e. the lowest proportion ) among the euro area central banks. if we compare operating expenses, i. e. including personnel costs, administrative expenses, depreciation of tangible fixed assets and banknote production, in relation to the balance sheet total, the proportion for the banco de espana in 2013 was 0. 12 %, which is also the lowest among the group of the six national central banks with the biggest balance sheets in the eurosystem. in short, on the basis of these data the banco de espana can be said to score highly, comparatively speaking, from the standpoint of the efficient use of its resources. the directorate general for banking supervision is the business area in the bank most affected in terms of functions and human resources owing to the start - up of the ssm, though it is not alone in this. it had a staff of 416 at the start of 2013, 16 % of our total employees, 373 of whom were managerial staff ( 222 were bank examiners ) and 43 belonging to other bis central bankers ’ speeches areas of professional specialisation. as i shall now explain, it is naturally this area that has been and should continue in the future to be the focus of the efforts to adapt to the ssm. the functioning of the ssm let me very briefly describe the core characteristics of the ssm. the new banking supervisory authority has two components : the european central bank, accommodating the new supervisory board, and the national supervisory authorities. it makes sense for the ssm to be called a “ mechanism ” because what is actually involved is an institution made up of different interconnecting cogs and wheels. the mechanism is based on cooperation arrangements entailing decision - making by the supervisory board and, ultimately, by the ecb governing council, which remains the maximum decisionmaking body, and by the national supervisory authorities, which continue to play an essential role, since they will provide most of the human and material resources for the mechanism and combine the experience and knowledge of the different national banking systems. the banks of the countries participating in the ssm have been divided into two groups of significant and less significant institutions. the ecb will exert “ direct supervision ” over the former ; as regards the latter, it merely assumes “ indirect supervision ” functions, as the national authorities will in fact continue to be responsible for their effective supervision. a list of 120 significant banking groups has been