Therefore, although Spanish institutions have already largely adapted to these regulatory changes, there are still some outstanding reforms to be applied, which will require them to make further adjustments. Lastly, the main medium-term challenge lies in the new competition framework derived from the new technologies and progressive financial disintermediation. New technologies can quickly change the competitive framework by increasing competition in some segments. That will oblige institutions to anticipate changes and adapt to the new environment, even though this entails a rise in costs in the short term, which will be difficult to manage in an environment of low profitability. One of the areas where the highest degree of penetration by new entrants has been observed is payment services, particularly retail payments, which is causing a decline in income from transactional services. Furthermore, adapting to these technologies may involve greater operational, and even reputational, risks, with aspects such as cybersecurity gaining in importance. But new technologies also entail fresh business opportunities for banks. On one hand, these technological changes allow immediate remote access to a broad range of financial services, which may enable general administrative expenses to be reduced. The relatively scant penetration of digital banking in Spain suggests that there is ample scope for this form 7/8  of banking to grow, providing Spanish banks with an opportunity to expand their business. The application of artificial intelligence and the use of large databases with real-time information (known as big data) may also provide for significant efficiency gains.
the leverage ratio, the Spanish banking system as a whole shows, on the contrary, slightly higher levels than the euro area average. Also, Spanish banks evidence, overall, a sound liquidity position, with their LCR ratio above the European average. Regarding the resolution of institutions, in recent years a number of regulations have been approved in Europe establishing a common framework for the EU, and defining the circumstances in which banks with financial difficulties should enter wind-up or resolution processes. In this setting, a new category of senior non-preferred debt instruments has been created, which ranks below senior debt in the payment priority of insolvency proceedings, with a view to facilitating compliance with the minimum requirements for own funds and eligible loss-absorbing liabilities, known as MREL. The MREL requirements that the Single Resolution Board has started to set for significant European institutions are an added reason for Spanish banks to strengthen their capital in the present environment of recovering profitability and an economy that is growing at a significant pace. More recently, December 2017 saw the completion of the second phase of reforms in the Basel III framework. The reforms include, inter alia, the improvement of the standardised methods for calculating credit and operational risk, restrictions on the use of internal models and changes in the leverage ratio. These changes will be implemented in two phases that will conclude in 2027.