The declines were also broad-based across portfolios and owed, to an extent, to sales of impaired loans by some banks. This too is welcome news, since these markets tend to be highly sensitive precisely to uncertainty. As a result, the ratio of non-performing bank loans to the resident private sector in Spain reached 3.8% in June 2022, which marked a return to recording lows following the global financial crisis. The pace of correction in Stage 2 loans – those whose borrowers continue to meet their financial obligations but show at least one indication of potential deterioration – has also quickened, with a drop of nearly 10% year-on-year in June 2022. These loans currently account for 7% of total lending to the resident private sector, still higher than pre-pandemic figures. Naturally, vulnerability is most acute in those sectors hardest hit by the pandemic and by the higher energy costs. In a similar vein, forborne loans,1 most of which are classified as Stage 2 or non-performing, were down by 7.7% to June 2022, with their share of total lending shrinking to 4.5%, again below pre-pandemic levels. Second, the profitability of the Spanish banking industry continued to improve in the first half of the year, adjusting for the extraordinary profit recorded largely as a result of the mergers that took place in 2021. Specifically, the sector’s ROE stood at 10% in H1, up by  1  Forborne loans are also typically associated with possible repayment difficulties for borrowers; indeed, more than half are classified as non-performing.
Deloitte and Central bank Audit submit a joint auditor’s report on the annual financial reporting for the Fund. The Government has submitted a draft bill recommending that the Supervisory Council should appoint an external auditor. This would be in line with international developments and best practice in this field. The Executive Board is Norges Bank’s executive authority. The Executive Board has increased its oversight of investment management in recent years. In 2006, an advisory board was set up to support the Executive Board in the field of investment management. The board comprises four experts with extensive experience from large funds and institutions managing equities, fixed income instruments and other assets. Previously, Central Bank Audit was also responsible for Norges Bank’s internal auditing. When Deloitte was made responsible for the financial auditing of the Fund’s accounts, the Executive Board’s audit committee and an internal audit unit were also established. The audit committee comprises three of the Executive Board’s external members. The committee serves as a preparatory body for the Executive Board on matters relating to risk management and internal control. In 2008, the Executive Board issued a new job description and investment mandate for the executive director of NBIM. The organisation of NBIM is based on the executive director’s responsibility and authority as general manager of NBIM, which includes reporting directly to the Executive Board and regular supervision by the governor of Norges bank on behalf of the Executive Board.