But I think that over the coming years, we should continue to explore ways to encourage institutions to improve the way they collect and use internal information to run their business and manage their risks, as well as the possibilities for harnessing and using this information as regulators. 4  Increased feed-back to reporting institutions  So far, I have mainly talked about initiatives which regulators can take that should have the impact of reducing the costs of producing financial information. But I think it is possible to go further than this. In fact, I think that we can take initiatives that actually give something back to the reporting entities - in other words, initiatives that provide them with clear benefits. This is the fourth element that I wanted to mention, and perhaps is best explained with a couple of examples. Let me take my first example from the Spanish context. In Spain, as in some other countries, we maintain a central credit register. This contains information about all the direct and indirect credit exposures – i.e. loans and guarantees – with a value of € or more, which have been granted by banking institutions and other lenders to their clients. As a central bank and banking supervisory authority, we use this database to assist us in evaluating macro-prudential trends and the credit risk in the economy as a whole. Of course, the data doesn’t get into the register of its own accord but rather must be reported by the lending institutions.
Earnings are obviously following the same trend as in 2007 and reflect the persistent effects of the risks associated with the subprime crisis, with valuation losses on assets and higher risk-related costs. A compound indicator, such as ROE shows a decline in profitability, but it still stands at an average of 14 per cent, compared to 18.9 per cent for the three largest banking groups in the first quarter of 2007. On this point, I would like to put this decline into context. It follows several years of exceptional profits, which raised questions about their sustainability. Despite declining income, the French banking system is still financially sound: the Tier 1 solvency ratio based on original own funds stood at an average of 7.1 per cent for the three largest banking groups at the end of 2007, much higher than the minimum ratio of 4 per cent set under Pillar 1 of the Basel II Accord. Banks increased their solvency ratios in the first quarter of 2008 and the Commission Bancaire attaches a great deal of importance to this effort. The benefits of business diversification, the effectiveness of the measures taken to limit risk exposures and the satisfactory capital levels have also enabled the major banking groups to remain highly rated by the leading international agencies. 2  BIS Review 82/2008  2. The current economic situation calls for vigilance nonetheless, since banks must be ready to cope with new risks that may occur at any time.