13. 06. 2023 productivity, sustainable growth and prosperity 45th anniversary of cinco dias madrid pablo hernandez de cos governor * ienglish translation from the original in spanish ladies and gentlemen, i would like to begin by thanking amanda mars, the managing editor of cinco dias, for inviting me to take part in this event to mark the newspaper's 45th anniversary. since 1978, a year that also saw the approval of the spanish constitution, this newspaper has daily reported on and appraised the most important issues for our economy. it has thus been able to testify to the changes that have swept through the country, which have yielded very marked improvements in its citizens'well - being. over the past 45 years spain has witnessed cumulative growth in gross domestic product ( gdp ) and in consumption, both expressed per capita and in real terms, of 83 % and 60 %, respectively. this should not come as a surprise. the economic literature highlights the positive impact democratic institutions can have on economic growth, thanks, among other factors, to improvements in the business climate, private investment and the opening up of trade, as well as to greater fiscal capacity and spending on essential public goods, such as education and health. in the case of spain, these changes have been further enhanced by the european integration process. for instance, the economy ’ s degree of external openness, measured in terms of the weight of exports and imports in gdp, has increased by almost 50 percentage points ( pp ). the stock of private productive capital ( relative to employment ) has increased by 40 %, and much the same can be said of the stock of residential capital ( relative to the population ). the stock of public capital, essentially comprising transport, health, educational and other infrastructure, has almost tripled in real per capita terms over this period. government spending on education and health has risen twofold. the percentage of the adult population with intermediate and higher studies has increased by 28 pp and 20 pp, respectively. moreover, since 1978, the spanish population has grown by over 10 million, and the number of people in work has risen by more than 8 million, including over 6 million women. this has raised the female participation rate from a mere 28 % to 54 %. overall, economic success in the democratic era can probably be put down to a combination of our economic integration into europe, the consolidation of stability - oriented economic policies, the development of our welfare state and the modernisation of our tax system. against

that there is enough recapitalisation capacity in resolution, one - third of the minimum tlac requirement is expected to be covered with instruments other than cet1 ( that is, debt ). it is important to bear in mind that the tlac establishes a common minimum global requirement and that national authorities have the right at any time to apply higher requirements in their jurisdictions. the tlac is a new prudential requirement that has different objectives than the capital ratio. regulatory capital is mainly to absorb losses in a going - concern situation, whereas tlac is meant to ensure loss absorption in gone - concern situations ( that is, beyond the point of nonviability ). i should add that, in a resolution context, the location of loss absorbing resources becomes very important and, for this reason, the tlac standard gives guidance on how these resources should be distributed within the banking group. this highlights another important difference between the capital framework and tlac : the location of resources. while the former is required on a consolidated basis for the group as a whole, tlac is required where resolution takes effect and where critical functions are performed. one of the most complex issues in the design of the tlac was the need to ensure consistency between the two main banking resolution strategies : the single point of entry and the multiple point of entry. under a single point of entry strategy, resolution actions will be taken in a single legal entity that is basically the parent company of the group, which will have to hold sufficient external tlac. additionally, a certain amount of loss - absorbing capacity should be pre - positioned in all material subsidiaries. this would ensure that losses are up - streamed to the resolution entity, thus avoiding putting the material subsidiary into resolution. by contrast, under a multiple point of entry strategy, the application of resolution tools to different parts of the group is allowed under the assumption of limited interconnections between them. therefore, in this model, loss - absorption capacity is primarily located in each resolution entity ( subsidiaries and the parent company ). this is the resolution model chosen by the global spanish banks as it is a better fit with their business model. as i said, one of the most complex issues in the design of the tlac standard was to find the correct balance between taking into account the particularities of each resolution strategy and ensuring consistent treatment between them. in this respect, the bank of spain welcomes the inclusion of certain elements that go in