cannot pursue any economic policy avenue other than one which, firstly, provides for and boosts higher employment growth or, on the other side of the same coin, brings about swifter and more sustainable gains in our productivity and competitiveness ; and, secondly, helps curb the growth of our public and private debt with a view to subsequently reducing it. in economic policy, hits and misses only become clearly manifest after some time. just like big vessels which, owing to their great inertia, can only change course or speed slowly, an economy such as ours also moves with considerable inertia : correcting mistakes takes time and, almost always, entails losses in income and well - being, and social instability. our experience – both in the pre - crisis expansionary phase while the imbalances were accumulating and during their correction and the recovery of growth – should help us avoid errors, persevere with reforms to safeguard and enhance our competitiveness, and fulfil our public finance commitments in the european union. thank you. bis central bankers ’ speeches

04. 10. 2022 the situation of spanish banks in the new macro - financial environment * v foro banca / eleconomista pablo hernandez de cos governor * lenglish translation from the original in spanish. * good morning. allow me to begin by thanking el economista for inviting me to participate, once again, in this banking forum, which represents an excellent opportunity to discuss the present situation of the banking industry and the implications of the current macro - financial environment. our societies have been hit by several global events ( the pandemic, russia ’ s invasion of ukraine ) in quick succession, generating a highly complex macro - financial environment in which the risks of a global cyclical downturn have been magnified by persistently high global inflation, the tightening of financing conditions stemming from the widespread normalisation of monetary policy and the heightened uncertainty prompted by a broad - based downward revision of growth forecasts. the question of how the banking industry could be affected by this complex setting is an important one. the starting point : a banking industry with lower non - performing loan ratios and profitability above cost of capital to answer that question, i should first emphasise that the spanish banking sector started out from a relatively favourable position. allow me to illustrate this point with a few figures. first, the quality of banks ’ balance sheets continued to improve through to 2022 q2. nonperforming lending to the resident private sector fell by 12. 4 % in 2022 q2, seeing the pace of correction return to pre - covid - 19 levels after easing to rates of 5 % following the pandemic. the declines were also broad - based across portfolios and owed, to an extent, to sales of impaired loans by some banks. this too is welcome news, since these markets tend to be highly sensitive precisely to uncertainty. as a result, the ratio of non - performing bank loans to the resident private sector in spain reached 3. 8 % in june 2022, which marked a return to recording lows following the global financial crisis. the pace of correction in stage 2 loans – those whose borrowers continue to meet their financial obligations but show at least one indication of potential deterioration – has also quickened, with a drop of nearly 10 % year - on - year in june 2022. these loans currently account for 7 % of total lending to the resident private sector, still higher than pre - pandemic figures. naturally, vulnerability is most acute in those