This is so with regard to the diagnosis of institutions, to the risks they face in the medium and long run, and to the instruments they have to mitigate such risks. Traditionally, the Spanish supervisory model has been able to combine a demanding stance in respect of institutions’ risks with incentives for best-practices management. This has positioned Spanish institutions among the most efficient and profitable in the world, and the Spanish economy has benefited from a highly competitive financial system. In the coming years the challenge is successfully to transmit these values in the European context, but also to assimilate the best international – and specifically European – supervisory practices. We must allow our institutions to harness the benefits the single financial market can offer them. Accordingly, in overseeing our institutions, we should limit the inevitable cost all supervision entails, applying prudential policies that encourage appropriate risk management, through the tempered use of restrictive or coercive measures in relation to banks’ activities, and through the use of more effective instruments for obtaining prudential information. The second consideration on the European market is the need for all European supervisors to redouble their efforts as regards mutual collaboration. Indeed, we must move from collaboration to cooperation, and from there to joint action and mutual trust, if we wish to be capable of properly supervising a European financial market with increasingly blurred national boundaries.
There is a concern by the U.S. correspondents 2  BIS central bankers’ speeches  transferring funds for Middle Eastern customers that the correspondents might unwittingly be providing services to a terrorist organization, or be enabling a person or affected sovereign to evade economic sanctions. So, the correspondents close accounts for all banks in the Middle East. Similarly, there is a concern by the U.S. correspondents transferring funds for Latin American customers that they might unwittingly be providing financial services to drug traffickers, a money laundering risk. So, they close accounts for all banks located in Mexico, Venezuela and Colombia. The de-risking exercise succeeds in its risk-reducing objective, but it succeeds in an overly broad manner by cutting services indiscriminately to so many. The adverse and unintended consequences for certain regions of the world are clear and present. There are also implications for U.S. policy with respect to the role of the dollar as the international medium of exchange. These issues, while highly consequential, are not the object of my remarks today; rather, they are a symptom of what compliance can lead to – namely, a reason to restrict business activity. Given the size of penalties for violations, and the potential reputational damage associated with this business, it is very difficult to quarrel with the business judgment. The success of compliance over the last 20 years has conditioned business leaders to think about compliance as a pathway to terminate or constrain a risky business relationship.