Macroprudential policy is especially important in a country like Spain, which belongs to a monetary union and a banking union, since – as we have seen in the past – the financial and business cycles of the various countries that make up the currency are not always harmonised with those of the euro area as a whole. Considering that the euro area has a common monetary policy and supervisory policy and that there is limited scope for fiscal policy measures, macro-prudential policy has a fundamental role to play in addressing the credit cycle. I will now move on to institutions’ adaptation to the other components of the international regulatory reform such as stricter requirements for own funds and liquid assets, and other requirements under the new resolution legislation. These regulatory changes were agreed at international level in response to the shortcomings that became apparent when the financial crisis broke out ten years ago now. Their aim is to boost banking systems’ resilience to adverse shocks, and to minimise the cost to taxpayers in the event of resolution. In other words, they seek to reduce the likelihood of future financial crises, and if they do happen, reduce their impact on society. 7/11  The first phase of the reforms, agreed between 2010 and 2011, focused, among other things, on strengthening the quantity and quality of banks’ capital and introducing new liquidity requirements and limits on credit concentration. Almost all of these requirements will have come into force by the end of 2019.
The total capital ratio, meanwhile, has increased by 1.7 percentage points over the last four years, and the leverage and liquidity ratios are above the European averages. Indeed, the recent stress tests carried out by the European Banking Authority (EBA) and the Banco de España show the considerable resilience of Spanish banks’ solvency under adverse scenarios. However, while recognising the significant progress made in recent years, the Spanish banking industry continues to face significant challenges, which are largely shared by other euro area banking systems. Notable among them are: i) the need for further progress in reducing unproductive assets which remain at high levels; ii) raising profitability; iii) strengthening the industry’s reputation by preventing misconduct; iv) adapting to the new regulatory framework and strengthening the highest-quality capital ratios; and v) competing in a new financial environment arising from technological progress and the emergence of new players (see Chart 2). Reducing unproductive assets As I have already said, the reduction in non-performing loans and foreclosed assets from the peak levels they reached during the crisis has been significant. Private-sector nonperforming loans, which have fallen by 60% from their peak in 2013, currently stand at the same level as in 2009. Foreclosed assets have followed a similar pattern, falling by 40% from their peak in 2012. The economic recovery has certainly contributed to this process, but it has also been driven by credit institutions’ management of troubled assets and by supervisory pressure.