The firming and intensification of these trends will largely depend on developments in the Spanish economy and on recovery taking root. The outlook for the economy remains favourable; so far, it has proven resilient to an external environment in which growth forecasts for the global economy have been revised downwards, and in which the recovery in European countries – those most important for our economy – has lost momentum. Thus, on the domestic front at least, it would be necessary to embed the reforms under way, thereby enhancing our capacity for recovery. 2  BIS central bankers’ speeches  The start-up of the Single Supervisory Mechanism Among the challenges posed by the SSM is that of attaining quality bank supervision, applying strengthened and uniform standards and making the most use possible of the acquired knowledge of the various national authorities, while setting in place a common supervisory culture. In light of the work undertaken to date and the intense collaboration between the ECB and the national authorities, these goals are realistic. The Banco de España is striving to ensure this is a successful process, cooperating with the ECB and the other SSM participants. We have adapted our organisational arrangements and working methods to smooth interaction with the SSM and the ECB. A further key challenge will be to maintain a level playing field in the member countries, applying uniform supervisory principles. That is a major challenge, given that in Europe there is a wide diversity of banking models and legal systems.
The consultative process of the TLAC proposal will be conducted in parallel with an impact study which will include (i) an analysis of the TLAC needs for each institution which may have to be resolved; (ii) a survey to assess the depth of the market in each jurisdiction  4  BIS central bankers’ speeches  involved; (iii) an analysis of the historical losses incurred by global systemic banks at the height of the crisis; and (iv) an assessment of the economic impact of the proposal, both at institution level and as to how it will affect the supply of credit. The difference from the Basel requirements lies in the instruments eligible for meeting the new requirement. Thus, in addition to all the equity instruments envisaged under Basel, the proposal permits, and in fact requires, the inclusion of debt instruments, generally subordinated debt instruments. Experience shows that capital may disappear in a crisis, and quickly so. The authorities must, therefore, have debt and equity instruments which (through debt reduction and/or conversion into equity instruments) allow them to resolve and recapitalise institutions from within, without need for bail-out by the public authorities. Will this be the end of the reforms? I think not, at least as far as other financial sectors are concerned. The considerably higher prudential requirements on banks naturally cause some credit intermediation to shift to other financial sectors, in a phenomenon commonly known as “shadow banking”.