These rigorous asset classification criteria indicate that potentially problematic assets at savings banks in credit to construction and real estate developers are € billion, 46% of the total. The specific loan loss provisions set aside for these problem assets account for 31% (if we added general provisions, the figure would be 38%). Obviously, the specific provisions considered to compute these figures are those associated to this potentially problematic loans and not the total amount of specific provisions. Spain’s system of specific provisions has been tightened to drive banks towards making tougher and swifter provisions. A non-performing loan, once the value of the collateral has been taken into account, should be fully provisioned in one year. Collateral value is considered using significant haircuts, which range from 20% in the case of completed housing to 50% in that of land. Provisioning must also be made for foreclosures, up to 30% if they have been on the balance sheet for two years. The provisions are determined by means of transparent parameters, compliance with which is obligatory for all banks. This means they are not the subject of negotiation between bank managers and external auditors. In sum, Spanish deposit institutions are not hiding potentially problem exposures, and nor are the figures for losses small or the provisions made low or far removed from the fair value of these assets. We are very transparent and rigorous in valuing assets and we will continue to be so in the future.
To accomplish this, we have a team dedicated to going out into the region to gather economic intelligence and to help our communities develop programs to support local economic development. Let me speak a little further about our work analyzing local economic conditions and how we use this work to help our stakeholders. We have developed a number of analytical tools to track the regional economy. To get the most up-to-date read on economic conditions in our District as possible, we conduct two monthly business surveys. Our Empire State Manufacturing Survey gives a real-time read on manufacturing conditions in New York State, while our Business Leaders Survey allows us to track economic activity across the tri-state region in the broader services sector. We also conduct regular polls of small businesses in our area to better understand their evolving situation and needs. In addition, we publish monthly indexes of economic activity for New York State, New York City and New Jersey. We also monitor the financial health of households through our quarterly Household Debt and Credit Report and track the state of school finances in our region. But economic data can only tell you so much. It is also imperative that we engage with people in our region to see the broader picture behind the facts and figures. To this end, I regularly travel to various parts of our District to hear firsthand about local economic conditions and to get a sense of the issues and concerns facing businesses and residents.