Spain has made relatively more progress than other euro area countries in reducing the volume of non-performing loans built up during the crisis. Moreover, economic growth – albeit at lower rates – can be expected to continue to help to gradually reduce them over the next few years. Despite these improvements, the level of unproductive assets of Spanish banks (especially those related to business in Spain) remains relatively high and above precrisis levels. 3/11  Reducing unproductive assets continues to be a challenge for the industry, requiring banks to strengthen the application of active management policies to their impaired assets. In this respect, the agreements to sell troubled asset portfolios announced over the past year will accelerate the reduction of future NPL ratios more than initially estimated solely on the basis of the cyclical improvement in the economy and the experience of previous credit cycles. In order to address this challenge, which most other European banks also face, the European economic and supervisory authorities have taken initiatives to accelerate the reduction of NPLs. In particular, the European Commission announced a package of measures in March this year, which included a proposal to review the capital requirement regulations and an NPL provisioning schedule. Correcting the high level of impaired assets is key for two basic reasons. First, because the balance-sheet clean-up will improve banks’ profitability and solvency. That is to say, it will free up resources currently devoted to financing unproductive assets and allow them to be used to finance new lending.
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.