luis m linde : central bank monetary policy, regulatory and supervisory measures closing remarks by mr luis m linde, governor of the bank of spain, at the v international banking conference / grupo santander, madrid, 14 november 2012. * * * let me first thank banco santander, its chairman emilio botin and its chief executive officer, alfredo saez, for inviting me to the closure of this fifth international banking conference. the first of these annual conferences was held in 2008. a review of the matters addressed that year, which now seems distant, and those on the agenda today, reveals a high degree of coincidence. we are still in the management of the post - crisis and the economic situation is, in some respects, worse than it was five years ago. it is worse in terms of growth or, at least, growth prospects, and worse in terms of unemployment or stock market capitalisation. the financial crisis, which began in 2007 in the united states and took on a systemic dimension in 2008, following the lehman brothers debacle, has confronted the developed countries ’ central banks with great challenges. i wish to refer to the central banks ’ response in two specific areas. firstly, in respect of monetary policy. and secondly, in the area of banking regulation and supervision. central bank measures in the monetary area in the conventional monetary policy domain, since there was no inflationary risk over the relevant horizon owing to the deterioration of the economic outlook, the central banks ’ priority has been preventing the disinflationary process in the western economies from translating into deflation. back in october 2008, in a concerted move the central banks of the main economics cut interest rates by 50 basis points, and this was followed by further cuts in late 2008 and early 2009. currently, after an unprecedented monetary impulse, rates stand at one of the lowest points in history. the narrowing of the room for manoeuvre for conventional monetary policy measures gave a leading role to liquidity - provision policies and the implementation of exceptional or non - conventional measures, aimed at ensuring the transmission of interest rate cuts to agents ’ financial costs and to facilitating their access to funding. since the crisis began in august 2007, there have been numerous innovations in monetary policy implementation. these have involved increasing the number of institutions with access to central bank funding ; extending the collateral eligible in monetary policy operations ; lengthening the maturities at which liquidity was supplied to the market ; and public and private asset - purchase programmes ( or loans

good instrument and we advocate its use as a new macroprudential instrument. the fact that many ailing banks have been systemic banks has been another consideration influencing supervisors ’ stance as to what the response to the crisis should be. consequently, another significant change in banking regulation arrangements is to set in place a capital surcharge for global systemic important banks ( gsibs ). a global important bank is not only a large bank. it is a major bank with significant cross - border activity, a complex bank in terms of its structure, and an interconnected bank that is not liable to be replaced in certain markets. regarding global systemic important banks, i should also mention the so - called “ recovery and resolution plans ”. it is important to highlight the value of this instrument in reducing systemic risk and also a formula for taking into account differences between business models in regulation and supervision. one of the final components of basel iii is the leverage ratio, which should be seen as a complement to the risk - based regulatory framework. its primary aim is to respond to the underpricing which may exists in the model - based calculation of risk, in particular trading book risk. basel iii has entailed a considerable effort of convergence, at least regarding the calculation of the capital ratio numerator. however, we should strive to achieve greater convergence also in the calculation of the denominator. some analysts and regulators, and some banks too, have pointed out that there are differences in the calculation of risk - weighted assets that are not the result solely and exclusively of differences in levels of risk. it would be frustrating if all efforts to strengthen capital levels were weakened by excessive disparities in the calculation of risk - weighted assets across different banks and countries. lying outside the basel iii framework are, finally, the possible structural reform of banking models, where we already have rules, such as the so - called volcker rule ; proposals whose implementation is under way, such as those of the vickers commission in the united kingdom ; and the more recent proposals by the european union ’ s experts group, chaired by my colleague erkki liikanen. all these measures or proposals come down to different formulas to separate the riskiest banking activities, from the more traditional and less risky ones. the differences between volcker, vickers and liikanen are in the formula for achieving this segregation and in its degree of complexity. this will never be a simple matter, given the need for banks, even those with simple business models,