, when institutions manage their risks appropriately, they are promoting an effective allocation of available economic resources. banks ’ risk analysis and evaluation, prior to granting financing, means they act as an essential filter for the functioning of the economy. they enable the correct allocation of available financial resources by distinguishing between those projects with a high probability of success and those lacking in medium - term viability. true, excessively tight lending standards may act as a brake on innovation and growth. but, as we have seen, when this filter does not work properly, and when lending standards are excessively loose, ultimately too many projects that prove non - viable are financed, destroying value for the economy. lessons from the crisis one thing the crisis has reminded us of, sadly, is that financing a firm or individual which, a priori, has little chance of meeting its payment obligations is very poor business, for three reasons. first, economically, this is a bad agreement both for the customer concerned and for the bank. second, it is too for the country ’ s legal system, which sees a significant increase in its workload, thereby delaying and hampering its workability. and third, from a social standpoint, what is involved is very poor business with harmful consequences for society in the form of dismissals and evictions. it is always better not to have granted a loan than to have to deal with a non - performing loan, although some error in granting loans is inevitable. moreover, looking at our real estate bubble, it is likewise obvious that any loan should be granted thinking of the likelihood of both the principal and the associated interest being repaid, instead of basing oneself on the value of the collateral. of course, the responsibility for analysing the ability to pay falls on the bank, not on the customer. undoubtedly, applying strict standards means having to say “ no ” on many occasions to applications for funds. and at times of heady growth, this entails very bad press and is difficult for the bank to assume, particularly if the competition is lax in its lending standards. naturally, it is tempting to imitate the competition when a strategy produces short - term profit. those banks that decide not to follow this path will undergo pressure from the market and shareholders to imitate their rivals and boost those business areas that are proving profitable at that time. risk culture plays a crucial role in being able to withstand such pressure. 6 / 13 let us not forget that runaway credit growth and the subsequent

disintermediation will involve significant benefits for society ; but it is not free from challenges for banks, for the regulator and, naturally, for the banco de espana itself, in its role as guarantor of financial stability. among the benefits for those demanding funds, associated with a more diversified financing structure, are, on one hand, their greater stability in the face of shocks that affect specific institutions in the financial sector. indeed, the international financial crisis highlighted the greater difficulties in gaining access to funding for those firms depending exclusively on bank lending, in contrast to those with a more diversified financial structure. these problems were more acute for those firms – chiefly smes – operating with a small number of banks more harshly affected by the crisis, since the possibilities of replacing their usual lenders with new banks was not always easy owing to asymmetrical information problems. 4 / 7 on the other hand, the development of non - bank funding sources may also contribute to providing readier financing for specific investment projects ; for instance, those undertaken by innovative or newly created firms, for which the availability of bank lending may be more limited. it should be borne in mind that the launch of some of these projects may have a positive impact on firms ’ productivity growth. naturally, these advantages for those demanding funds may have positive effects for society as a whole, insofar as they result in higher and more stable economic growth. from the standpoint of fund suppliers, the existence of alternative means of investing their saving may result in more attractive return / risk combinations for various savers, depending on their needs and preferences. so that households and firms may benefit fully from all the advantages of banking disintermediation, they will need to have sufficient financial knowledge. this is something that the banco de espana, along with other bodies such as the cnmv, is firmly committed to through financial education programmes such as “ finance for all ”. evidently, disintermediation poses substantial challenges for banks. greater competition from non - bank intermediaries may affect both banks ’ business volumes and net interest income. this potential loss of income is significant at the current juncture, at which banks are posting modest levels of profitability, the economy is slowing and private - sector demand for funding remains sluggish. in response to this more competitive and challenging environment, banks could adopt various strategies such as greater income diversification, the containment of operating costs and increased investment in technology. from the regulatory standpoint, the