More important still, however, is the need for the Banco de España’s autonomy in the area of supervision to continue to be respected and for governments to continue to resist the temptation to interfere in its supervisory decisions, while continuing to design legal instruments and to defend the proper use of public resources. The Banco de España must continue to maintain a dialogue with governments, not only advising them but also listening to them (since nobody has a monopoly on good ideas), although supervisory decisions must continue to be based, as up until now, solely on a professional basis. 6  BIS central bankers’ speeches  I have been emphasising today what has been done during these years of crisis by Spain (that is to say, everyone), because until our country has regained the trust of the rest of the world, the attention of investors will continue to be focused on what all relevant parties have done and are doing to correct the imbalances of the Spanish economy. In particular, they will be monitoring and assessing the extent of cooperative behaviour to overcome the crisis. I’m going to conclude with a few words on Europe, as I believe our membership of the European Union and of the Monetary Union is another good reason for viewing optimistically our possibilities of overcoming the crisis. Some measures need no further explanation, as they clearly show how Europe has helped us and continues to help us during this crisis.
Indeed, all financial sectors are impacted by market developments as the boundaries between financial activities are becoming increasingly blurred. More broadly, all competent financial authorities, central banks, supervisors and ministries of finance should strengthen their coordination mechanisms for managing a crisis impacting cross-border financial institutions. In Europe, an important step has been taken in this direction with the Memorandum of Understanding signed by the financial authorities of all EU Member States in June 2008, which established common principles, procedures and terminology to be used by all parties involved in a cross-border crisis. BIS Review 123/2008  5  Conclusion We are experiencing a very challenging and demanding episode of the market correction which started more than a year ago and was due to a significant underassessment and underpricing of risks in global finance. This fostered extremely high risk–taking behaviour, excessive leverage and a widespread use of toxic, obscure and abnormally sophisticated financial instruments. In this regard, global finance was potentially unstable before the start of the turbulence and this was mentioned publicly, particularly in 2006 and the first part of 2007, by a number of speakers, including myself. The sub-prime mortgage crisis has therefore played the role of a trigger but there was a good deal of explosive around. My experience of previous crises is that it is extremely important to analyse situations very carefully and lucidly and never to underestimate its gravity.