I have had the opportunity to discuss these issues in previous appearances before you,6 but on this occasion I should like to focus precisely on those factors that constrain the possibilities for sustained economic growth, since the negative impact of the pandemic has made the need for action to raise potential growth all the more important. First, however, I should like to focus on a very important development that was not assessed in the Bank’s Annual Report as it has occurred since the report was prepared. I am referring to the approval by the European Council, in July, of the European recovery fund (Next Generation EU). Its importance in this context lies in its nature as an instrument for providing a powerful boost to the potential growth of the Spanish economy, although its success will depend on knowing how to make appropriate use of it. As I have already mentioned, the economic policies that we are implementing in response to the crisis need to find a balance between supporting the recovery and spurring economic adjustment to the scenario that will emerge after the pandemic. In this setting, supranational support at European level appears to be fundamental to achieve this twofold objective. The degree of economic and financial interdependence within this geographical area is very high.
We also hope that they will do so only when they are ready. And when they are ready, we believe that they should adopt the options and approaches that are most appropriate for the state of their markets, their banking systems, and their supervisory structures. Is Basel II appropriate for banks in emerging markets? A second question I hear frequently is whether Basel II is even appropriate for banking systems in emerging markets, which I would like to address now. In my view, the principles and vision of supervision in Basel II are valuable for supervisors and banks in all markets. The great level of diversity in markets and in financial systems worldwide makes it difficult - and perhaps even counterproductive - to try to specify a single rule that could be applied to all banks in all countries. Fortunately, Basel II’s menu approach provides supervisors and banks with options that make its basic standards more readily available to many kinds of organisations and economic circumstances. As I mentioned earlier as well, Basel II’s three-pillar approach provides an “efficient frontier” of policy objectives that are relevant to banks in any country by emphasising the need for banks to assess their risks; the need for supervisors to evaluate those assessments; and the need for transparency to promote greater marketplace discipline.