Admittedly, we are seeing a sharp rise in the doubtful assets ratio; however, this is not linked to this type of complex product, rather it is linked to developments in the real economy and therefore what may be called a classic banking cycle problem. Accordingly, on the left-hand side of the balance sheet there is still a lot right in Spain. BIS Review 133/2008  5  Spanish banks’ assets, even taking into account the rise in doubtful assets, are largely of good quality. The fact that Spanish banks’ assets are mostly high-quality and that they have a liabilities structure in line with the activity they finance, in terms of maturities and the degree of permanence, is related to their business model. In contrast to the originate-to-distribute model, the activity of Spanish banks is based mainly on attracting savings to lend to businesses and households and, in the process, maintaining close and lasting links with their customers. This business model has normally been known as "traditional" banking, and many analysts prior to the summer of 2007 equated the concept of traditional with “antiquated”. True, just as the originate-to-distribute model has limitations, which have been laid bare, so too does traditional banking, insofar as it may indeed be antiquated in its management strategies and risk and cost control procedures.
perform an assessment based on the information available to the decision makers, or what can be called an assessment ex ante. The question that should then be answered is whether the analysis and the interest rate decision were reasonable given the information and the forecasts available at the time. Did the Riksbank, for example, arrive at a reasonable balance between stabilising inflation and stabilising resource utilisation? An assessment based on the information available to the decision maker also has the great advantage that it can be conducted in real time immediately after the publication of the monetary policy decision and the information and analysis on which the decision is based. One does not thus need to wait for a couple years to see what the outcomes for inflation and the real economy will be. The decisions of the Riksbank can therefore be assessed and debated on an ongoing basis. An important part of the assessment of a flexible inflation targeting policy is to assess how credible the inflation target is, measured in terms of the extent to which various economic agents’ inflation expectations correspond to the inflation target. If inflation expectations are stable close to the inflation target then the target is credible and it will therefore be easier for the Riksbank to stabilise both inflation and resource utilisation. As I have already said, it takes time for monetary policy to have an impact on inflation and the real economy. Monetary policy is therefore governed by forecasts.