. by just over 35 %. and almost half of this total amount of capital in the sector was in the form of buffers above the regulatory minimum amount, which can, if necessary, be released as part of the prudential response to the crisis. moreover, in the wake of the global financial crisis, mortgage lending standards have been much stricter and, in the case of loans to firms, they have been much more closely tied to their efficiency. likewise important from the standpoint of the industry ’ s resilience has been the deleveraging undergone by the spanish non - financial private sector during this period. from 2010 to 2019 there was a decline of almost 30 pp of gdp in the household debt ratio ; and in the case of the non - financial corporations sector, its net debt fell by more than 45 pp of gdp from 2010. in any event, the most appropriate means of illustrating the banking sector ’ s resilience is through the stress tests we regularly perform as supervisors. in july, the ecb conducted a vulnerability analysis of the banks under its supervision. the aim was to test, prospectively, banks ’ resilience to the shock caused by the pandemic. the results of this exercise for spanish banks are very similar to those obtained at the banco de espana in the forward looking exercise on spanish banks ( flesb ) stress test exercise, whose final results were published in our autumn financial stability report. in the baseline scenario considered by the banco de espana ’ s vulnerability exercise, which includes cumulative declines in euro area gdp in 2020, 2021 and 2022 of around 1. 6 %, the reduction in the solvency of spanish banks as a whole was estimated at 2 pp for significant institutions with an international presence, at 1 pp for other significant institutions and at 0. 8 pp for institutions under the direct supervision of the banco de espana, leaving them at 9. 9 %, 12 % and 18. 7 % on average, respectively, above the prudential requirements established. under the harshest scenario, in which spanish gdp declines by 5. 7 % from 2020 to 2022, the reduction in the solvency ratio is much greater ( 3. 9 pp for significant institutions with an international presence, 4. 6 % for other significant institutions and 1. 3 % for institutions under the direct supervision of the banco de espana ), leaving average common equity tier 1 ( cet1 ) capital at 8 %, 8. 4 % and 16. 6 %

sabine lautenschlager : banking regulation and supervision – you can't have one without the other speech by ms sabine lautenschlager, member of the executive board of the european central bank and vice - chair of the supervisory board of the european central bank, at the 9th annual efr stakeholder round table on & quot ; financial fragmentation or integration & quot ;, brussels, 22 march 2018. * * * the financial crisis showed what can happen when banks are not safe and sound. so the goal is to make banks safe and sound, and avoid future crises. to that end, we have revamped regulation, and we have strengthened supervision. it ’ s indeed vital to work on both fronts. without supervisors, rules would have little effect ; without rules, supervisors would have no job – or at least no firm basis for doing their job. you can ’ t have one without the other : regulation and supervision need to be aligned. but are they? let us take a look at the euro area. in 2014, banking supervision was transferred from national to european level. and since then, we ’ ve achieved a lot. however, we could do more, and that brings me to regulation. how european is regulation? well, it ’ s true, of course, that there is a single rulebook. but by and large, regulation in europe remains fragmented to a degree that makes it hard to reap the full benefits of european banking supervision. and the problem starts with the scope of that supervision. large investment firms and thirdcountry branches are still not covered by it. this situation should be changed to restrict regulatory and supervisory arbitrage. then there are the options and national discretions contained in european regulation. some of them are still exercised differently across the euro area. it ’ s up to legislators to harmonise them. the same is true for fit and proper assessments. the rules here are also very diverse. and finally there are the tools for crisis management. we still have no common approach to such things as insolvency laws and moratoriums. this too needs to change. likewise, the rules for early intervention measures need to be streamlined. all this begs the question : is the banking union living up to its full potential? i would say : it ’ s not, at least not yet. but it could if the rules were further harmonised. now let ’ s turn to the global level. with basel iii finalised,