I expect that this dynamic process will accelerate through work within the AIG, with supervisors outside of the Committee, and by banks in the months and years ahead. Risk management and complex products Our response to changes in risks must also be dynamic, and it is to this aspect that I would like to turn now. In recent years, we have seen tremendous growth in the derivative markets, which include a range of quite complex products. In addition, these markets have attracted new participants, in particular hedge funds, whose risk profiles and exposures may not be transparent to regulators or to other market participants. While these developments have had the beneficial effect of diversifying and spreading credit risk, they have also posed new risks. I would like to briefly discuss steps that both supervisors and the industry are taking to promote better management of these risks, and to ensure that supervision keeps track with market developments. Supervisory efforts One important area where we are working within the Basel Committee to promote sound risk management practices is through a review and, if necessary, update of the Committee’s 1999 paper on sound practices for banks’ interactions with highly leveraged institutions. As part of this review, we are looking at emerging best practices related to banks’ interactions with credit derivatives markets and hedge funds. In addition, we have had informal discussions regarding the potential impact on bank safety and soundness of prime brokerage activities.
As regards expenditure, 28% of interviewees live in households whose spending has outpaced income over the past 12 months, a percentage that is in line with the average observed in OECD and EU countries. 51% financed this shortfall resorting to savings, and 35% through informal credit (friends, employer, etc.). As in the foregoing cases, differences were observed in terms of educational level and level of income. As both levels increase, the percentage of instances in which spending has exceeded income diminishes and the percentage of cases where greater spending is financed with savings increases. Undoubtedly, financial behaviour does not depend solely on financial literacy, but is also influenced by other circumstances; but, in light of some of the above-mentioned results, I do believe there is clearly room for improvement in the field of financial education in Spain, and that we should continue to strive in this direction. Financial education in a context of technological innovation and developments Giving priority attention to financial education is, moreover, particularly significant in the current context of financial innovation. Technological developments are changing the way in which customers relate to financial institutions and how they take up financial products. And this, though it has attendant advantages, also entails risks. Greater financial culture, greater awareness of the new reality and a greater development of the general public’s digital competences can help mitigate these risks. 5/7  I would like to refer, in particular, to three examples of these risks.