when the international standards propose more than one, so recognising the particularities of financial institutions ; and, finally, by permitting a common accounting framework, it will prevent the choice of accounting options from being a factor that may distort competition. allow me to end this review of the challenges facing financial institutions by pointing out that their responses must be supplemented by market discipline and by the action of financial - services consumers. in effect, market discipline is an essential supplement for supervisors ; market participants, by rewarding those institutions that act appropriately, generate the necessary incentives for managers to behave prudently. yet, for market discipline to be possible, market participants need to have the necessary information. this is why the promotion of transparency is of paramount importance, to ensure that institutions report information that is reliable and based on generally accepted valuation principles in a timely and opportune fashion. this qualitative and quantitative information must enable the results obtained by institutions, the risks they are assuming and the practices employed in their management and control to be assessed. finally, in a non - zero - risk world, the action of consumers of financial products and servces is, as i have already mentioned, very important. they should be expected to be responsible and active, searching for information and understanding the risk profile of products, especially those with a greater degree of complexity. with an approach based on these principles they will be able to take their decisions responsibly, assuming levels of debt that are reasonable, not only in the light of their sustainability at present, but also in the future. however, consumers must not only have access to information, they must also be able to assess it. institutions must play a role in this respect, offering their customers the products that best suit their needs and informing and advising them accordingly. in addition, in recognition of the importance of raising the acumen of bank customers, the banco de espana is developing a project to educate, through the lnternet, the users of financial products and services. the project ’ s first phase will be available at the beginning of next year. allow me, like every year, to conclude by referring to other aspects of the management of the banco de espana. as part of our ongoing effort to increase the transparency and improve the communication of the bank ’ s activities, this year ’ s annual report includes an additional chapter on the management of the banco de espana in 2003. this chapter summarises the main tasks performed and the organisational changes

into inflationary pressures. consequently, central bankers do not consider it necessary to tighten monetary policy, so that interest rates remain very low and continue to fuel the cycle and the consequent expansion of credit and debt. white ( weiβ in german ), which is not only a type of wine but also the name of the chief economist of the bis who retired last summer, has been calling in recent years for the introduction of financial stability considerations into monetary policy design and implementation. and we should acknowledge that the latest events have shown the validity of his proposals. in short, he recommends that central banks act against the build - up of financial imbalances even in the absence of inflationary pressures at the usual reference horizons. but a more conservative monetary policy in expansionary phases would not only have favourable effects on tempering the amount of credit, it would also improve credit quality. monetary policy also affects how banks assume risks. researchers at the bank of spain have shown that a long period of low interest rates contributes to relaxing banks'credit granting standards. the market pressure to maintain high returns in a setting of low interest rates and, therefore, of lending offering very tight income margins, leads some banks to extend credit to individuals and firms with a greater risk profile. also, the expansionary monetary policy stance means this greater risk takes longer to materialize, which in turn stimulates ever greater increases in this type of risky investment. banks thus increase their risk profile by financing individuals and companies with a history of default, or by increasing the credit extended to new borrowers who, lacking a credit record, entail a greater level of uncertainty and, therefore, of potential risk to the bank. finally, in an environment marked by low interest rates and the search by banks for yield, the general conditions of risk acceptance and selection are substantially relaxed, which translates into the riskier granting of credit that will materialise once the cycle turns down. if we add to the foregoing ingredients a strong increase in banking competition, both among deposit institutions and between these and other less regulated non - bank competitors, the pressure to increase the risk profile in order to maintain past profit levels simply heightens banks'incentives to take on more risk in upturns. having commented on the problems of excessive credit growth and how a more conservative monetary policy can mitigate them, i would like to move forward to the second part of my speech, and concentrate on the resilience of the banking system and the role of supervisors. we should