reaching and it is worth anticipating their impact as, although spanish banks have largely adapted to the regulatory changes, application of some reforms is still outstanding. although the total capital ratio has risen by 1. 7 percentage points over the last four years ( reaching 15. 1 % in june 2018, exceeding the regulatory minimum ), and the leverage and liquidity ratios are slightly above their european averages, when we focus on the regulatory capital with greatest loss - absorbing capacity, i. e. ordinary capital or cet1, the ratio has risen by just 0. 3 percentage points. in this regard, the banco de espana ’ s in - house stress tests to assess prospectively the level of solvency of the spanish banking system revealed that institutions have a high degree of resilience to possible adverse macroeconomic scenarios. nevertheless, in view of the dispersion of results across banks and the possibility that the risks which materialise exceed those envisaged in the adverse scenario, banks would be advised to strengthen their capital insofar as the recovery in profits allows. indeed, according to june 2018 data from the european banking authority, spanish institutions ’ cet1 and tier 1 solvency ratios are some of the lowest among the euro area ’ s banking systems. apart from the need to adopt strategies to strengthen their top quality capital shown by comparison across europe, spanish banks also need to : ( i ) take advantage 8 / 11 of the current economic growth and recovery in profits to raise levels of solvency and generate operating margin with which to meet the economy ’ s future credit demand in a stable way ; ( ii ) anticipate the impact of the reforms pending implementation in the framework of basel iii ; and ( iii ) ensure compliance with the resolution requirements without excessive dependence on the market ’ s appetite to absorb new non - preferred debt instruments ( see chart 7 ). the new competitive environment however, beyond the difficulties of adapting to post - crisis regulation and restoring banks ’ balance - sheet and income statement quality, the biggest challenge being faced by the spanish banking sector is the new competitive framework in which it operates, and in particular, that deriving from new technologies and the advance of financial disintermediation. in this new competitive environment, both bigtechs and fintechs are altering some of the traditional paradigms of retail banking, in particular, the traditional role of customer accounts in building loyalty and as the essential pillar on which to offer universal banking services. these new operators can leverage the opportunities offered by

technology and the new payments regulation to offer their value - added services using the “ basic ” deposit - taking and account - management service platform provided by the banking system. this scenario represents both a short - term challenge, insofar as new competitors may enter specific areas, such as retail payment services, with the consequent drop in business and income for banks in this area, and, fundamentally, a major future challenge deriving from the risk that banks may be relegated to providing undifferentiated and low value - added basic services. against this competitive background, banks have a number of initial advantages but are being forced to react in order to capitalise on the opportunities the new situation offers. the responses may range from specialisation to digital transformation, taking advantage of the possibilities offered by technology and the new regulations, with an emphasis on adequate data management. in any event, this transition will entail a short - term increase in costs in a context of low profitability. issues such as cybersecurity also take on particular significance in the process of adaptation of institutions to new technologies as they can also lead to an increase in operational and reputational risk. i would also like to highlight the growing challenge bigtech firms are posing in the financial sector, not in their more prominent customer - facing facet, but as providers of a significant amount of financial - sector infrastructure in areas such as cloud - based services. these actors now constitute a critical component of the financial sector. in any event, new technologies offer banks fresh opportunities, both in terms of business and potential efficiency gains. the application of artificial intelligence and the use of large databases with real - time information ( big data ) may also provide for significant efficiency gains in terms of both business activity and regulatory compliance. 9 / 11 similarly, the use of new technologies in the financial sector may offer advantages to society in that it reduces intermediation costs, improves households ’ and smes ’ access to finance and facilitates financial inclusion ( see chart 8 ). financial disintermediation another factor making the environment in which credit institutions operate more competitive is the advance of financial disintermediation. in spain, as in countries such as germany and italy, the bulk of non - financial corporations ’ borrowing has traditionally come from bank loans. however, in other countries, such as the united states and the united kingdom, capital markets play a much bigger role in corporate finance. there is no consensus as to the optimal financing structure to best ensure financial