is part of the minimum capital pillar 1, and is directly reflected in the solvency ratio. elsewhere, reputational aspects, which are very important for the banking sector, are also evaluated as part of pillar 2. both pillars of the capital framework repeatedly mention the concept of “ risk ”. a quick search of the text of the european solvency regulation will bear this out : the word risk appears no fewer than 1, 500 times. however, there are clear differences between so - called financial risks ( such as credit and market risk ) and non - financial risks, which by their nature are more difficult for credit institutions and supervisors to address. non - financial risk is directly related to malpractice or non - compliance proper to conduct risk ; but going beyond this conference ’ s theme, it also refers to it events, reputation, governance and cyber security. unlike credit or market risks, non - financial risk is unconnected to specific financial decisions, is much more difficult to quantify than traditional risks and can only be reduced or mitigated. despite all these difficulties, or perhaps precisely because of them, non - financial risk has been firmly on regulators ’ and supervisors ’ radar screen since at least 2004. this followed the approval of basel ii which, as i indicated earlier, included a capital requirement for operational risk. today, the measurement and management of these risks remains equally complicated, but their importance for banking business has in fact increased. evidence of this is the map of risks and vulnerabilities annually published by the single supervisory mechanism ( ssm ). viewing the snapshot for 2021, we can see how a large portion of the sector ’ s weaknesses are related to non - financial risk. this is not really anything new. in previous exercises the ssm has also included these components. and logically so. allow me a few examples : ( i ) reporting systems and technological platforms have become essential, and as any banker can confirm, they have become a key component of any viable business model ; ( ii ) the prevention of money laundering has taken on a most significant dimension in europe, following various scandals and cases of fraud. indeed, an overhaul of the attendant regulatory and supervisory framework is on the table ; ( iii ) finally, given what has been discussed in this conference, i need not convince you that the nature of the retail banking business calls for great care as regards conduct towards customers. on this last point, there have been many scandals in recent years. in fact, calculating all

national level. on the contrary, the national authorities have had to address the considerable challenge posed by the loss of human resources to the ecb. in our case, thanks to the success of banco de espana candidates in selection processes, approximately one - quarter of our supervisory staff have moved to work for the ecb, including three senior managers who today occupy high - responsibility posts – one director general and two deputy directors general – in this institution. the third milestone has been the setting in place of an operational framework for the pursuit of the supervisory functions of the ssm. in this connection, work has been performed since the outset of the project to define common frameworks for action enabling the different practices pursued by different national authorities, with their greatly differing supervisory cultures, to be overcome. this work saw a supervisory manual devised in which processes and the operational methodology are described. naturally, certain key aspects of supervisory procedures have still to be smoothed. in fact, the manual should be seen as an evolving document, the regular update of which on the basis of experience accumulated is needed to complete convergence towards better supervisory practices. likewise, to achieve greater consistency in the regulatory framework, it has also been necessary to review the national application of the various options permitted under european regulations. european solvency regulations – namely the directive and regulation on capital requirements – confer some degree of discretion upon member states and national supervisors in the implementation of specific regulatory aspects. such aspects include the timetable for the progressive adoption of new solvency standards and the granting of exceptions in respect of compliance with certain prudential requirements. this degree of national flexibility had to be accepted at the time by european legislators in the complex directive and regulation negotiations. naturally, the fact such a diversity of rules are in place hampers supervisory action and prevents the homogenous treatment of banks based on their objective position. accordingly, in recent months, the ssm supervisory board has worked intensely in this field. their efforts have seen a preliminary agreement allowing a common approach to be adopted in relation to the application of these “ national options and discretions ” in the hands of the supervisory authorities. the terms of this agreement are now being subjected to public consultation, a process which will finalise on 16 december. i trust that this agreement, once it is finally approved by the ecb, may be implemented in the opening months of 2016 and that, in any event, future revisions of european legislation will envisage less room for discretion on the part of the member states, so that