That is to say, if there were a business segment of this type, it would be very small. Bad debt ratios in the Spanish mortgage market stand at 0.4%, compared with 4% in the United States. The information available for Spain therefore precludes talking of a market of this type. Regarding bad debts, the aggregate ratio for the sector during 2006 was on a declining trend and, in any event, is holding at minimum levels, whether analysed from a historical perspective or in comparison with institutions in other euro area countries. In other words, this indicator of the credit risk borne by institutions is not currently showing signs of difficulties feeding through to the industry, and this despite the higher growth of doubtful assets over the course of 2006. This higher growth, however, must be analysed bearing in mind at least two considerations. First, the increase in doubtful assets is due in part to the strong growth in activity recorded in recent years. In an expansionary setting it is logical that, if the volume of credit increases, the volume of doubtful assets will afterwards increase with some delay even if default probabilities hold constant. Second, it should not be forgotten that the changes in accounting rules introduced by the Banco de España to adapt to International Financial Reporting Standards mean that doubtful assets must be recognised earlier and in a higher proportion.
The emergence in recent years of new products, such as credit derivatives and CDOs (collateralised debt obligations), and deeper markets for other more traditional products, such as asset-backed securities, have provided financial market agents with a new range of profit and risk possibilities, allowed more dynamic and intensive risk management, and made for greater diffusion and better diversification of risk. Similarly, the emergence of new operators, with investors prepared not only to assume new risks but particularly to do so over longer terms, has in recent years enabled shocks to be absorbed on markets with a lower level of stress and, subsequently, lower volatility. Finally, regulated and non-regulated financial institutions alike, by increasingly having better risk management systems, combined with supervisory and regulatory models based not on coercive restrictions but on providing incentives for proper risk management, contribute clearly to market stability. Unsurprisingly, as a result of all these factors, the international financial system has demonstrated notable stability and substantial capacity to absorb adverse impacts level-headedly, ensuring that the few episodes of overreaction have been very short-lived. However, these structural improvements should not mask the fragilities inherent in this new and more complex environment. The improvements based on proper risk management and diversification are genuine ones. But they entail considerable management complexity and the growing involvement of agents not subject to prudential supervisory arrangements who do not yet have tried and tested experience in managing the risks assumed in more adverse economic environments.