governance and its problems. in my appearance before the economic affairs committee last july, i addressed the source of the sovereign debt crisis in europe and the main reasons for its depth and development. i believe i should reiterate that, to overcome the crisis, a new version of monetary union governance will be needed. there have so far been two different stages in the reform of european governance. in the first, efforts focused on remedying the shortcomings detected in macroeconomic and financial policy oversight and coordination, and on the creation of financial assistance mechanisms. in the second stage, following the june 2012 summit of euro area heads of bis central bankers ’ speeches state or government, a banking union, greater fiscal integration and a common economic policy framework were proposed. here you may recall that the european commission communicated its plans for the banking union to the parliament and the council on 12 september, with a legislative proposal to give form to the first of the three pillars which would underpin such a union : a common supervisory mechanism for which ultimate responsibility would be centralised at the european central bank, while there would be scope for some degree of decentralisation, enabling the knowledge and experience of national supervisors to be harnessed. the move is just a preliminary one and should be viewed with caution, since in order to complete the banking union an integrated bank crisis management mechanism and a common deposit guarantee scheme will be needed. this will not be possible without progress towards a fiscal union, an area that obviously poses most significant political difficulties. along these same lines, i believe we should welcome the european central bank governing council ’ s decision on 2 august to set in train the so - called outright monetary transactions. this comprises a programme to purchase public debt on secondary markets, subject to compliance with specific conditions, as part of the financial support programmes of the european financial stability facility and its successor, the european stability mechanism. since the start of this crisis the ecb has adopted a series of conventional ( short - and medium - term liquidity provision, changes in the deposit rate ) and non - conventional measures ( long - term liquidity provision, debt purchases ) aimed at preserving the sound functioning of monetary policy, which is tantamount to saying the transmission of the policy rates the ecb wishes to maintain at all maturities. these measures have also been useful in buying time for governments to correct the macroeconomic imbalances and the shortcomings in the institutional design of the euro which are, in part, at the source of the

brings in terms of improved management, market discipline, etc. has been accepted, and should in the future spare spaniards from again suffering the consequences of the excesses detected at certain savings banks. another most important qualitative advance with a view to the medium term has been the enhanced transparency of our banks, not only thanks to the stress tests which, as you know, were first proposed by spain, but above all to the greater disclosure requirements progressively imposed over recent years. while the merit of what has been achieved should be accorded to many, allow me briefly to acknowledge the work of the staff of the banco de espana, and most specifically the body of bank examiners, economists, lawyers and the senior managers of the supervisory, regulatory and legal arms of the bank, on whom the greatest burden has fallen in terms of implementing the strategy approved in legislation. the fact is, the task discharged by them has perforce been complex and time - consuming. the decision by the authorities – previous and present alike – to use limited public funds in the reconstruction of the banking system was warranted because the big spanish banks did not and do not need help and because, given the delicate situation of our country ’ s public finances then and now, the impact on the markets of a sharp and sudden increase in the budget deficit might have led to the collapse or intervention of the entire spanish economy, as indeed occurred in some other countries. but with this strategy of minimising the use of public resources, the restructuring work increases exponentially and extends over time. the spanish supervisor has had no “ bad bank ” with which to restructure the sector. here we have not seen a state which, armed with taxpayers ’ money, has bought bad assets from banks, thereby resolving all supervised banks ’ problems at a stroke. our bank ’ s supervisory team has had to apply a strategy which has obliged it to seek predominantly private solutions. and this takes considerably more time than addressing or doing away immediately with problems by injecting public funds. yet this requirement to promote private solutions does not fully explain the enormous workload that has fallen on the supervisor over recent years. insofar as it was decided at first to retain without major changes the singular legal arrangements for savings banks, and particularly their governance, this made it necessary to pursue most complex negotiations with the parties involved, namely trade unions, managers, regional governments, etc., each with very different interests from those that prevail in any mercantile company, where market discipline