t appear to have had an impact on business or on the bank ’ s share price. at the ecb we don ’ t comment on individual banks. this case is in the courts and they are responsible for clarifying the facts. as you say, financial stability and business remain unaffected for the time being. some seem to think that this matter belongs in the past. the ecb ’ s banking supervision arm has procedures for dealing with potential irregularities related to governance, if necessary. is governance in the spanish banking system adequate? a bank ’ s reputation is its main asset, and governance is hugely important in the banking sector. it can and must always be improved. there is room for improvement both in spain and in the other euro area countries. it ’ s a matter of priority. governance must continue to improve, not only because the ecb says so, but also because institutional investors are insisting on it. good corporate governance is ultimately seen from the point of view of maximising profits for shareholders. 3 / 7 bis central bankers'speeches governance covers topics such as the separation between the chair of the board and the chief executive officer, in addition to broader issues such as how the board operates and the effective independence of independent directors. shadow banking is one of the financial risks that you usually highlight. how can this problem be contained? the shadow banking sector includes investment funds, pension funds and insurance companies. the latter are closely supervised entities, therefore at the european level it ’ s the asset management industry that is causing the most concern. the low interest rate environment has led to changes in investment strategies, in favour of assets that are riskier, less liquid and highly leveraged. in spain this leverage is limited, but it is increasing in europe and it is quite intense in the united states, particularly in the case of hedge funds. supervision in this sector is not comparable to banking supervision and there is no lender of last resort. there must therefore be much more transparency, particularly with regard to the leverage of funds. we need macroprudential instruments that can be used to avoid problems. there have been some instances of liquidity problems which didn ’ t develop into anything more serious because of the more positive, and at the time benign, market conditions. but in different circumstances this could trigger a crisis of confidence. what will the outcome of the banco popular resolution case be? former shareholders are making claims against the srb and because of the sale to banco santander. i would prefer not to give

an opinion because i have been called as a witness in this case. as a general point, there were two stages during my time as a minister. the first involved injecting €43 billion worth of public money into the banking system and the second involved resolving banks without providing a euro of public money. in terms of acting in the public interest, the second is much better. mergers are being suggested as a solution to the lack of profitability. yet, at the same time, supervisors are acknowledging that mergers between domestic banks offer few synergies. and cross - border operations are full of regulatory obstacles, so what ’ s the solution? to the extent that it helps to reduce excess capacity, consolidation is positive from the point of view of cost structure. we also need to maintain a competitive environment. in other words, we need to avoid a situation in which there are very few banks. in this context, fintech and bigtech companies are also potential competition. domestic consolidation might be a solution for small and medium - sized banks, but the larger banks could perhaps look to cross - border consolidation. in any case, it ’ s not the ecb ’ s place to say which banks should or shouldn ’ t merge. that ’ s for the banks themselves and the market to decide. and there isn ’ t a single solution that works in every case. consolidation helped improve the cost structure and remove excess capacity in spain, but there are other factors that must be taken into account depending on each specific case. will the regulatory obstacles be removed? the single supervisor has already said that removing this type of obstacle is important from both a supervisory perspective and a domestic perspective. we mustn ’ t forget that some of these obstacles come from national law. for instance, the different insolvency rules across countries make cross - border consolidation much more difficult. national authorities still have a certain amount of discretion on specific matters related to banking regulation. it ’ s important that the european commission continues to stress the need to harmonise these types of rules. we ’ ve already had six years of negative rates and i don ’ t know whether there ’ s concern 4 / 7 bis central bankers'speeches from a financial stability perspective. our financial stability publications have warned about this. there are two concerns right now : bank profitability and, more significantly in my view, the non - bank financial sector ( previously known as the shadow banking sector ). the average profitability of european banks is 6 %. this is