median debt burden ratio ( the ratio of financial costs to gross operating profits plus financial revenue ) by between 2. 5 pp and 5. 6 pp ( from a starting point of 11. 6 % ), depending on the percentage of debt and loans that are refinanced in the near term. to put this into perspective, the percentage of employment accounted for by firms under high financial pressure2 would rise by 1. 6 % following the interest rate increase, from 9. 1 % before the hike. household income is primarily being supported by labour market developments – given the year - on - year increase of 3. 6 % in the number of persons employed and of 5. 1 % in hours worked – and, to a lesser extent, by the government policy support measures. however, high inflation is driving a significant decline in real disposable income. indeed, in 2022 h1 households ’ disposable income increased by 4. 2 % year - on - year in nominal terms, which transforms into a 3. 1 % fall once developments in the private consumption deflator are taken into account. bank lending to households has held stable in recent months. however, a distinction can be drawn between the performance of mortgage lending ( growing consistently at rates of just over 1 % ) and that of consumer lending ( shrinking at rates of around 4 % ). unlike firms, in 2022 households are not accelerating the growth of their bank deposits, which have been on a sustained growth path ( above 5 % ) since 2021. together with cash, they account for 40 % of households ’ total financial assets. simulations have also been carried out on the potential impact on household income of the rise in energy prices and interest rates, which is notably uneven across income percentiles. the upturn already observed in energy prices would generate an increase in the median household's energy expenditure as a proportion of its budget from 10 % to more than 12. 5 %. by way of comparison, energy expenditure represents around 7 % of the budget of higher - income households and the increase would be proportionally lower. a firm is understood to be under high financial pressure when its financial expenditure exceeds the sum of its gross operating profit and financial revenue. as regards the effect of the surge in interest rates, an increase of 300 bp, in line with that observed to date, would generate a 3. 9 % rise in the proportion of households with a high financial burden3 ( to 13. 8 % of the population

jaime caruana : reform of the international standard for bank capital notes for the testimony by mr jaime caruana, governor of the bank of spain and chairman of the basel committee on banking supervision, before the committee on economic and monetary affairs, european parliament, brussels, 18 january 2005. * 1. * * introduction i am honoured to appear before the committee on economic and monetary affairs today to discuss the reform of the international standard for bank capital. in past years, members of the european parliament have kindly welcomed bill mcdonough, the prior chairman of the basel committee, as well as other basel committee representatives. i would like to thank you for giving me this opportunity to contribute to the debate and to support your important work in considering the proposed directive on capital adequacy requirements for banks and investment firms. these hearings are extremely valuable and represent a vital stage in the european legislative process, where the european parliament has a crucial role. i will be speaking today in my capacity as chair of the basel committee. but i hope you will allow me to digress on one or two occasions to supplement my remarks with my perspectives as governor of the banco de espana. the banco de espana is a central bank and banking supervisory authority within the european union ; it will therefore be a direct subject of the legislation that is enacted on capital adequacy. this legislation will not only affect the banks that we supervise, but also our own supervisory system and the tools we use to carry out our responsibilities, so i hope my additional perspectives will be useful. the publication of basel ii in june 2004 was a milestone which marked the culmination of a worldwide and unprecedented effort spanning more than five years. it involved extensive and open discussions among bankers, central bankers, bank supervisors, market observers, and the public. the basel committee published three proposals for public comment. it conducted several impact studies and it engaged in extensive discussions with interested parties. i believe that this broad and often highly technical dialogue was of mutual benefit as a learning process. it contributed greatly to the thorough examination of banks ’ risk management practices. this was necessary in order to find ways to harness recent advances in these practices to promote financial stability. it also allowed us to take into account concerns and suggestions and to make a considerable number of changes that have significantly improved the framework. let me mention, for example, improvements made in important areas such as smes, procyclicality, complexity, recognition of collateral, and the treatment of securitis