14. 01. 2020 the competitiveness of the spanish economy : from recent achievements to medium - term challenges spain investors day pablo hernandez de cos governor good evening, ladies and gentlemen. allow me to thank the governing board of spain investors day and their chair, benito berceruelo, for kindly inviting me to speak to you on the tenth and therefore landmark anniversary of this annual international forum. since its first edition, this meeting has become a showcase affording spanish companies the advantage of offering a first - hand view of their position and prospects to foreign investors. i am convinced that the meeting will, once again, successfully contribute to boosting spain ’ s image and international investment in our country. in my address i shall be analysing the competitiveness of the spanish economy over this past ten - year period. for me, there is no better variable than competitiveness for describing some of the structural changes our economy has undergone in the past decade. it also allows me to highlight some of the main challenges lying ahead, including those stemming from the new protectionist tendencies that have arisen in the past two years. achievements in fact, competitiveness symbolises the metamorphosis of our economy in the past decade. and, as a result, the improvement in the external imbalance is the most visible feature of the progress made since the crisis in correcting the economy ’ s main macrofinancial imbalances. indeed, the external surpluses posted since 2012 are a strongly distinctive feature when set against the external deficits that had systematically characterised previous upturns. in this connection, it is worth offering some figures illustrating the scale of this change. specifically, the spanish economy ’ s current account balance has improved by more than 11 percentage points ( pp ) of gdp since the start of the crisis, turning from a deficit of 9. 4 % of gdp in 2007 to a surplus of around 2 % in 2019. in terms of components, while all captions have contributed positively to this adjustment, of most note has been the correction of the net balance of non - energy goods and of the primary and secondary income balance. the contributions of the latter to the improvement in the total balance in this period were almost 6 pp and 3 pp, respectively. but the energy goods, tourism and non - tourist services balances have also each contributed about 1 pp. as suggested, among the key factors behind this correction of the external balance are the gains in competitiveness achieved in these past ten years. these

the spanish economy, similar to that in other countries which, with the crisis, saw their banking systems collapse. some analysts drew parallels with the events in these countries and warned that similar problems could arise in spain. but this has not been the case. true, during the expansionary phase, private - sector debt grew at very high rates, although it should be clarified that the growth in asset prices – unwarranted by fundamentals – was less than in other countries. yet during these three years the spanish banking system has proven reasonably resilient ; only two small entities had to be taken under central bank control, and the volume of public aid made available was very small compared with the public resources earmarked to this end in other countries. the explanation for this different outcome in apparently similar situations must be sought in the quality of banking regulation and supervision, and in the retail banking - based business model of banks in spain. what happened was that the countries which saw their banking systems collapse were largely those which, in the preceding years, had most vigorously defended the benefits of a “ hands - off ” government approach to the functioning of the financial sector. this was quite the opposite of the approach of the banco de espana, a central bank that took to heart the lessons of the serious banking crises of the 1980s and early 1990s in spain. until the crisis erupted, the prevailing doctrine had advocated light - handed regulation, considering both our supervisory approach and our banking system ’ s business model, centred on traditional banking activities, as outmoded. but in the wake of the crisis, the pendulum has swung. now the predominant approach in financial regulation has gone to the other extreme. testifying to this is the work programme in place in the main international agencies and fora, such as the g20, the financial stability board and the basel committee on banking supervision. intense work is under way to introduce major changes into the international regulatory and supervisory framework so as to prevent similar crises from recurring and to improve the financial system ’ s resilience moving forward. such changes include most notably the new rules known as basel iii, which alter the regulation of the banking sector at the international level in several fundamental respects : banks will be required to have more and better - quality capital ; explicit requirements will be made in respect of liquidity risk ; and measures will be taken to mitigate the procyclical behaviour of financial activity. further, the fsb is working on the treatment of systemic banks, i. e