15 june 2021 remarks for afme / omfif european financial integration virtual conference thank you for inviting me to deliver this address for your conference today. the theme of the conference – european financial integration – is both a timely and timeless one. on the one hand, the pandemic has further underlined the benefits of previous initiatives related to financial integration in europe, most notably the banking union and its core components. on the other hand, the past year has also refuelled longstanding debates and discussions on the need for european further financial integration. yet a prerequisite for a successful and enduring financial integration at the european level is for europe itself to be aligned with global financial standards in order to achieve a truly global level - playing field. as such, my remarks today, which are primarily in my capacity as chair of the basel committee, will focus on the crucial importance for europe to implement the basel iii framework in a full, timely and consistent manner. financial stability is a global public good. in a world with integrated financial markets, preserving global financial stability requires global minimum standards that are applied consistently and in full by all jurisdictions. this was indeed the motivation for initial basel standards in the 1980s following the latin american debt crisis. and it remains just as important today. covid - 19 has highlighted the clear benefits and importance of having a global and prudent set of regulatory standards for banks. much has been said about how the banking system has remained broadly resilient to date, and how banks have not been “ part of the problem ” in exacerbating the economic crisis. this is in no small part due to the fact that banks entered the pandemic on a much more resilient footing that during the great financial crisis, thanks to the initial set of basel iii reforms, and the ongoing cooperation among basel committee members over the past year. in addition, the unprecedented range of fiscal and monetary measures taken by jurisdictions around the world to support the real economy have largely shielded banks to date from losses. 1 / 3 yet in order to safeguard global financial stability, it is crucial to lock - in the benefits of the outstanding basel iii reforms by implementing them in a full, timely and consistent manner. doing so would ensure that the regulatory fault lines of the global banking system – most notably with regards to excessive variability in risk - weighted asset, the gravity of which remains as important today as it was pre - pandemic – are adequately fixed. these reforms benefited from an extensive consultation

, especially for that segment of banks that finds it most difficult to tap the markets for funds. part of the challenge lies in the low profitability of banking activity and in the high cost of issuing eligible liabilities. in this scenario, it is essential that spanish institutions pay due attention to the organic generation of capital in the design of their strategy and contemplate the steps needed to be well - prepared for the future regulatory scenario and to improve their relative position in the european banking industry. another key element in the design of spanish banks ’ strategies should be to persevere with the efforts made to date to reduce non - productive assets. having regard to the figures for business in spain, the resident private sector ’ s nonperforming loans have fallen by 60 % from their end - 2013 peak. at that time, they accounted for close to €190 billion. this figure was practically €75 billion as at june 2018. in terms of the npl ratio, the early - 2014 peak was 13. 9 %. as at june 2018, the figure stood at 6. 4 %. the effort is clear to see. it is too in terms of foreclosed assets, which have fallen by almost 40 % from their 2012 peak, and stood, as at june 2018, at around €60 billion. nonetheless, the foregoing figures remain high in historical terms and dynamic management of these types of assets by banks remains necessary. they must set ambitious but credible objectives. 5 / 8 in designing these objectives, banks should bear in mind the supervisory expectations defined over the past 18 months. in particular, they should be very mindful of the guidelines the ssm published in march 2017 and the addendum thereto released in march 2018. the guidelines are predominantly qualitative. they describe measures, processes and best practices in the management of non - performing exposures, with a view to banks defining strategies that enable them to reduce the accumulated volume of such exposures. the addendum complements the guidelines and sets supervisory expectations as to the prudential provisioning levels for new non - performing exposures, considering as new those classified as such as from 1 april 2018. these expectations set a timeframe of two years for 100 % provisioning of unsecured exposures, and one of seven years for 100 % coverage of secured exposures. in this latter instance, moreover, provisioning is expected to be gradual, such that it is not left until the last year to set aside