19. 07. 2018 address on taking up office as a member of the council of state pablo hernandez de cos governor madame chair of the council, council members, lawyers, ladies and gentlemen, first i would like to thank mr. alberto aza and mr. juan velarde for having agreed to be my sponsors in the ceremony today. it is a real honour for me to take up office as an ex officio member of the council of state, the highest - ranking advisory body of the government and a time - honoured institution in spain. according to the spanish royal academy dictionary, an “ adviser ” is someone who gives an opinion on what they consider beneficial or necessary for the advisee. it is indeed an important aspect of the functions of the banco de espana, in accordance with its law on autonomy, to advise the government on economic and financial matters. from this dual status as a member of the council of state and as governor of the banco de espana, allow me to take the opportunity here to briefly reflect on what are the main challenges facing the spanish economy. in the past five years our economy has seen sharp growth in activity and a marked reduction in the unemployment rate, enabling a gradual correction of the imbalances built up before and during the economic crisis. availing myself of my recent council member status, i would say that the guiding principle should be to avoid becoming complacent and, on the contrary, to harness the economic expansion so as to adopt the measures that may provide for sustainable growth, a greater degree of stability and more extensive room for manoeuvre in the face of potential future crises. this advice stems from a diagnosis that is worth emphasising : the spanish economy still has significant factors of vulnerability. these include most notably high external debt, a level of public debt close to its historical high, an unemployment rate double that of our european partners and a financial system facing considerable challenges ; and this in a scenario where the economy must face the impact of the phenomenon of population ageing and the structural problem of low productivity. it is further worth recalling that, although the recovery has rested on a diverse set of measures, in spain and in europe alike, it has also been underpinned by the support afforded by the european central bank ’ s extraordinarily expansionary monetary policy. additionally, this expansion has been accompanied by a significant fiscal impulse in recent years. however, the effect of these monetary and fiscal impulses will tend gradually to fade in the coming

now turn to the experiences of the regional central banks in the east african community ( eac ) integration agenda. as you may be aware, the eac has mandated the monetary affairs committee ( mac ) with the key objective of implementing a monetary union which is a precursor to the full integration of the east african community. mac is comprised of the governors of the five east african central banks. technical sub - committees of mac focus on the thematic areas of macroeconomic issues of convergence, bank supervision, payments systems, financial markets, information technology and capacity building. these areas are indeed the building blocks of the envisaged monetary union. of particular interest to the banking sector is the harmonisation of regulation and supervision. this is of key importance to the increasingly regional kenyan banking sector in view of the costs associated with compliance to varying regulatory regimes. therefore, the harmonization of banking supervision and regulation continues to be at the top of the mac radar screen. what has been our score card in this area? overall, mac has served as a useful forum to share experiences on topical bank supervision and regulation issues and forge a common way forward. indeed harmony has been achieved in key regulatory issues such as operational independence of central banks, publication / disclosure of financial statements by commercial banks and business continuity management. we continue to share supervisory policies and procedures through joint arrangements. the east african central banks are at the moment in active discussions on a draft regional memorandum of understanding ( mou ). the mou, which we target to finalise by the end of the year, will enhance information sharing amongst the partner central banks. as you will appreciate, this initiative will facilitate the consolidated supervision of our regional banks. there are however challenges, some of which are legislative in nature as well as the microstructure of our financial system. going forward, mac will continue, relentlessly, to work towards harmonizing the east african banking supervision and regulation regimes. we are acutely aware that a harmonized regulatory regime will reduce compliance cost and spur regional expansion of banks. it is not an easy road, but one that we must tread. our vision will be ultimately achieved when the partner central banks can issue “ east african banking licences ” valid in all the partner states. ladies and gentlemen : it is my expectation that over the course of this morning, you shall as market players : • clearly identify ways in which the banking sector can facilitate regional integration. • brainstorm on regulatory and other barriers to regional integration from a banking and finance perspective