provisions to vary more closely in line with the credit risk existing in their balance sheets, and the profit and loss account fluctuates less over the cycle. the main point here is that this strengthens the solvency of each individual credit institution and the stability of the entire financial system. before continuing with the background to the dynamic provision, i should like to address a criticism made by accountants. it was said that this provision amounted to a distortion, and sometimes even a manipulation of the income statement. this is far from true. the spanish regulator required institutions to advise the market of the amount of this provision so that analysts and investors could, if they so wished, “ discount ” its impact. the mechanism is completely transparent and institutions cannot use it to manipulate their results. admittedly, bankers did not welcome the statistical provision as warmly as we supervisors did. in fact they openly opposed it at first, arguing, with some reason, that this provision, by tightening the requirements for spanish institutions alone, gave rise to an uneven playing field, especially for those institutions most heavily exposed to international competition. with time they came to appreciate that this provision helped strengthen their solvency and, therefore, their medium - term attractiveness and resilience, despite the fact that around 10 % of their net income had to be assigned to the statistical provision. the current scale of the international financial crisis, with credit institutions having an enormous difficulty for recapitalising without public intervention, has revived the interest on procyclicality of accounting standards and capital requirements. the topic has sprung from the academic arena, to which it was confined until very recently, to the forefront of regulatory and financial policy discussions. the financial stability forum, the international monetary fund, the basel committee on banking supervision and certain central banks have, among others, highlighted the need for an in - depth discussion of procyclicality and regulatory mechanisms that may help reduce it. i believe that the spanish experience of dynamic provisioning can serve as the starting point for this discussion. i am convinced that these provisions have significantly strengthened the solvency and stability of the spanish banking system, both on aggregate and at the level of each institution. clearly, this provision did not insulate spanish institutions from the global financial crisis, but it had certainly positioned them better to withstand it. let me conclude with three thoughts. first, i would like to see the standard - setting agencies, and the iasb in particular, as european law is one of the first to

into inflationary pressures. consequently, central bankers do not consider it necessary to tighten monetary policy, so that interest rates remain very low and continue to fuel the cycle and the consequent expansion of credit and debt. white ( weiβ in german ), which is not only a type of wine but also the name of the chief economist of the bis who retired last summer, has been calling in recent years for the introduction of financial stability considerations into monetary policy design and implementation. and we should acknowledge that the latest events have shown the validity of his proposals. in short, he recommends that central banks act against the build - up of financial imbalances even in the absence of inflationary pressures at the usual reference horizons. but a more conservative monetary policy in expansionary phases would not only have favourable effects on tempering the amount of credit, it would also improve credit quality. monetary policy also affects how banks assume risks. researchers at the bank of spain have shown that a long period of low interest rates contributes to relaxing banks'credit granting standards. the market pressure to maintain high returns in a setting of low interest rates and, therefore, of lending offering very tight income margins, leads some banks to extend credit to individuals and firms with a greater risk profile. also, the expansionary monetary policy stance means this greater risk takes longer to materialize, which in turn stimulates ever greater increases in this type of risky investment. banks thus increase their risk profile by financing individuals and companies with a history of default, or by increasing the credit extended to new borrowers who, lacking a credit record, entail a greater level of uncertainty and, therefore, of potential risk to the bank. finally, in an environment marked by low interest rates and the search by banks for yield, the general conditions of risk acceptance and selection are substantially relaxed, which translates into the riskier granting of credit that will materialise once the cycle turns down. if we add to the foregoing ingredients a strong increase in banking competition, both among deposit institutions and between these and other less regulated non - bank competitors, the pressure to increase the risk profile in order to maintain past profit levels simply heightens banks'incentives to take on more risk in upturns. having commented on the problems of excessive credit growth and how a more conservative monetary policy can mitigate them, i would like to move forward to the second part of my speech, and concentrate on the resilience of the banking system and the role of supervisors. we should