to mention that, since may, the figures – including those relating to the use of official credit institute credit lines – point to a less sharp contraction in lending to companies, a trend that is all the clearer if, along with bank loans, other channels of corporate financing, such as securities issues, are included. in respect of the initiatives to promote an appropriate flow of credit to smes, which are so important throughout the european union and, of course, in spain, some of the ideas tabled are rather unrealistic, owing to their technical complexity, to political difficulties or to both. however, certain corrections that can make a positive impact are indeed possible. on the national regulatory front, certain changes have been adopted. further to circular 4 / 2013, the banco de espana has revised the definition of smes, adopting the broader criterion recommended by the european commission ; moreover, with the entry into force in late september of the entrepreneurs ’ law, the discount factor applied to capital consumption envisaged in the new basel iii and european regulations has been introduced early. i would also like to clarify that the contractionary behaviour of business lending at the aggregate level may prove and, indeed, is proving compatible with a reallocation of resources within the sector, meaning that the reduction in credit for some companies runs alongside an increase in credit for those which, in the opinion of credit institutions, are better placed to undertake profitable projects. precisely in relation to the recovery in credit flows, i will focus in the rest of my address on the task at the forefront of the banco de espana ’ s priorities : the reform and strengthening of our banking system. bis central bankers ’ speeches in 2012, in accordance with the regulations approved in the february – may period that year, banks undertook a major provisioning drive ; and the memorandum of understanding and the financial assistance facility of up to €100 billion were negotiated with the european authorities. the effort by banks focused, above all, on setting aside provisions to strengthen the coverage of loans to the real estate development and construction sector and of foreclosures. moreover, in keeping with the memorandum, banks under restructuring or resolution were obliged to transfer to sareb, at an agreed price, the assets belonging to the above - mentioned balance sheets segments. as a result of this transfer, and bearing in mind the write - downs made, spanish banks ’ exposure to these risks has been drastically reduced, from €240 billion as at end - 2011 to €115 billion at end

quarter of 2024, clearly above the figure of 0. 1 % envisaged in the ecb's march projections. moreover, in the medium term gdp growth is expected to strengthen gradually, with private consumption as the main driver supported by growth in household disposable income. declining inflation and robust wage growth are two additional factors to consider. meanwhile, the ecb's monetary policy will exert less drag on the economy as 1 / 6 bis - central bankers'speeches monetary conditions gradually normalise over the projection period. as a result, the ecb's march projection exercise envisages moderate growth rates of 1. 5 % in 2025 and 1. 6 % in 2026, slightly above the average annual growth of the last two decades ( 1. 4 % ). as for inflation, in recent months it has performed largely as expected in the ecb's latest projection exercise, declining by a cumulative 8. 2 percentage points ( pp ) from its peak in october 2022 ( and by 3. 0 pp since march 2023 in the case of underlying inflation ), in a context in which the ecb's monetary policy continued to be transmitted robustly to financial conditions. however, according to the flash indicator, hicp2 inflation held at 2. 4 % in april, 0. 2 pp above the march forecast. going forward, inflation is expected to decline further in the coming quarters, albeit with a somewhat bumpy profile in the short term. indeed, energy base effects, the unwinding of crisis - related fiscal measures and the relatively slow moderation of services inflation will cause inflation rates to fluctuate during 2024. overall, the projections envisage a moderation in inflation to 2. 3 % on average in 2024 ( compared with 5. 4 % in 2023 ) and to around 2 % in 2025 and 2026. this progressive reduction in inflation would be compatible with robust – although more moderate – wage growth, against the backdrop of a recovery in labour productivity and the containment of business margins. these are expected to act as a cushion for wage pressures in the face of weak demand and the unwinding of supply bottlenecks. as for productivity, it is important to highlight the role of labour hoarding3 by firms to explain the positive performance of employment in recent quarters. despite weak demand, employers prefer to retain workers as they perceive labour shortages to be high and expect existing shocks to be temporary. therefore,