of the growing likelihood of this risk materialising. contributing to this decline have been the reduction in gains on financial operations and, to a lesser extent, the increase in operating expenses, although a portion of this was due to extraordinary expenditure associated with the restructuring of certain banks. in addition, the ongoing reduction in impairment losses that began in 2012 is showing some signs of exhaustion. indeed, in terms of their year - on - year rate, impairment losses increased for the first time since 2012, posting a rise of 3. 9 %. and we should not forget that, at present, the npl ratio is still significantly above that recorded before the financial crisis. specifically, in terms of lending to the resident private sector, in business in spain, the npl ratio stood at 5. 3 % in june 2019, 8. 7 pp down from the december 2013 high. foreclosed assets evidenced a further decline, standing below €40 billion in june 2019. that marks a 50 % reduction from the 2011 peak. against this backdrop, banks should persist in their management efforts to enhance the quality of their balance sheets, which is a fundamental factor for the recovery of profitability in the medium term. the other lever in banks ’ hands is to improve their efficiency, through a more appropriate management of their costs that does not limit their capacity to adapt to an increasingly more technified environment. in this respect, we should note that, in business in spain, the 4 / 10 efficiency ratio at the individual level, without taking into account severance payments, has increased ( worsened ) by somewhat over 9 pp since 2014, to 58. 8 %. as to the composition of operating expenses, the weight of personnel costs has diminished, and that of it and communications, outsourced services and amortisation has increased, reflecting to some extent the ongoing digitalisation and technological change at banks. it should be borne in mind that operating expenses are one of the most significant levers over which banks have direct control to increase the profitability of their business. in any event, it should also be stressed that spanish banks ’ efficiency ratio at the consolidated level, calculated as the ratio of operating expenses to gross income, is one of the lowest ( best ) in europe. the actual and projected reduction in the euro area economy ’ s rate of nominal growth and, as a consequence, the fact that interest rates are going to be at lower or even negative levels for longer, may ultimately affect financial institutions ’ profitability. indeed,

the banco de espana also ranks first for this ratio ( i. e. the lowest proportion ) among the euro area central banks. if we compare operating expenses, i. e. including personnel costs, administrative expenses, depreciation of tangible fixed assets and banknote production, in relation to the balance sheet total, the proportion for the banco de espana in 2013 was 0. 12 %, which is also the lowest among the group of the six national central banks with the biggest balance sheets in the eurosystem. in short, on the basis of these data the banco de espana can be said to score highly, comparatively speaking, from the standpoint of the efficient use of its resources. the directorate general for banking supervision is the business area in the bank most affected in terms of functions and human resources owing to the start - up of the ssm, though it is not alone in this. it had a staff of 416 at the start of 2013, 16 % of our total employees, 373 of whom were managerial staff ( 222 were bank examiners ) and 43 belonging to other bis central bankers ’ speeches areas of professional specialisation. as i shall now explain, it is naturally this area that has been and should continue in the future to be the focus of the efforts to adapt to the ssm. the functioning of the ssm let me very briefly describe the core characteristics of the ssm. the new banking supervisory authority has two components : the european central bank, accommodating the new supervisory board, and the national supervisory authorities. it makes sense for the ssm to be called a “ mechanism ” because what is actually involved is an institution made up of different interconnecting cogs and wheels. the mechanism is based on cooperation arrangements entailing decision - making by the supervisory board and, ultimately, by the ecb governing council, which remains the maximum decisionmaking body, and by the national supervisory authorities, which continue to play an essential role, since they will provide most of the human and material resources for the mechanism and combine the experience and knowledge of the different national banking systems. the banks of the countries participating in the ssm have been divided into two groups of significant and less significant institutions. the ecb will exert “ direct supervision ” over the former ; as regards the latter, it merely assumes “ indirect supervision ” functions, as the national authorities will in fact continue to be responsible for their effective supervision. a list of 120 significant banking groups has been