. those interested in this viewpoint should read the latest speech by fernando restoy, the vice - chairman of the cnmv ( spanish national securities market commission ). in it he suggests certain areas in which the regulation of these markets could be improved. i ’ m going to adopt a less ambitious approach, focusing on describing market behaviour from the standpoint of a country such as ours, which in recent months has had to tackle a lack of investor confidence. what have we learned from the behaviour of the debt markets in this second phase of the crisis? perhaps one of the key lessons is that markets are capable of identifying certain structural problems which, for whatever reason, may affect an economy ’ s solvency. and this is why markets can offer us economic policy pointers, of interest not only to them but also to us. restoring health to public finances, reforms to boost growth and reduce unemployment, the restructuring of our banking systems so they are positioned to promote growth when credit demand picks up, etc. are all pieces of advice of benefit to us and which are worth following. admittedly, some may say, markets issue warnings. but they usually do so belatedly. and this is true. turning to spain ’ s case, there was a more than 10 - year - long boom during which credit hit double - digit growth rates and the current account, which was practically in balance in 1996, began to run a systematically and continuously widening deficit. over this period the markets were not exactly profuse in giving signals about the imbalances that were building up. the markets, like spaniards, thought the spanish economy was doing fine. we should acknowledge, as raghuram rajan does when talking about the us economy, that this delay in realising the actual problems was shared by all agents in the economy. but that does not mean that, although they are late, the messages from markets do not merit being heard and given due assessment. if we think that investors ’ evaluation of problems is reasonable, then the most recommendable response is to follow their advice. we ’ ve also learned that the markets may not only err when they are late offering their advice, but that their judgments may also be mistaken. frequently, their information is diffuse or insufficient, and investors ’ view of different economies is shaped in an overly simplistic fashion. what we ’ ve seen, when this is the case, is that criticising their ignorance is of little use in practical terms. the proper response is to provide

sectors hardest hit by the pandemic and by the higher energy costs. in a similar vein, forborne loans, 1 most of which are classified as stage 2 or non - performing, were down by 7. 7 % to june 2022, with their share of total lending shrinking to 4. 5 %, again below pre - pandemic levels. second, the profitability of the spanish banking industry continued to improve in the first half of the year, adjusting for the extraordinary profit recorded largely as a result of the mergers that took place in 2021. specifically, the sector ’ s roe stood at 10 % in h1, up by forborne loans are also typically associated with possible repayment difficulties for borrowers ; indeed, more than half are classified as non - performing. 2 percentage points ( pp ) on june 2019. this was higher than our estimated cost of capital for the period ( 7 %, similar to the level estimated prior to the pandemic ). this improved profitability owed to a better performance in banks ’ recurring business, with growth of more than 10 % in net interest income and in fees and commissions. it is worth noting here that banks are beginning to pass through the increase in money market interest rates to new loans, albeit, for the time being, far more slowly than in the past. evidently, for variable - rate loans the impact is automatic, but it will likewise take some time. for their part, banks ’ wholesale funding costs are reflecting the tightening of financial market conditions, while risk premia are also rising. as yet, however, deposit interest rates have not increased, and to june there has been no significant shift of funds towards term deposits. further, listed banks as a whole recorded a year - on - year increase in impairment losses to june, as a result of specific contributions from business abroad, but at most banks these impairment losses declined. in any event, impairment provisions remained slightly higher than those recorded before the onset of the pandemic. third, as regards solvency, the overall common equity tier 1 ( cet1 ) ratio of spanish banks stood at 12. 9 % in june 2022, down 50 basis points ( bp ) on a year earlier, but 70 bp above the pre - pandemic level ( 12. 2 % ). the recent reduction owed to the increase in risk - weighted assets, since the numerator of the ratio barely changed. this solvency level implies higher voluntary capital buffers than key regulatory