In any event, this business segment is not free from challenges, especially at present when some of the economies to which our banks are exposed, such as Turkey and Argentina, are undergoing significant difficulties. Against this background, the international business model of Spanish banks, based primarily on activities conducted through subsidiaries operating in a decentralised fashion, with financial independence and engaging in traditional banking activities, is a mitigating factor that should be borne in mind. That said, and despite the conjunctural difficulties facing some of the countries in which Spanish banks are present, I would like to underscore the undoubted importance of geographical diversification as a source of medium and long-term value added and stability for these banks. The low profitability of the banking business in Spain is attributable to a combination of factors, some cyclical and others more structural. First, the high level of non-performing assets ensuing from the effects of the crisis adversely affects banks’ income statements both through the decline in interest received and, especially, the increase in the attendant asset impairment losses. The volume of these losses for Spanish deposit institutions as a whole peaked in 2012 and has subsequently tended to fall, although these losses continue to consume a large portion of revenue, meaning that pre-crisis levels have not been restored. Specifically, in terms of assets, these losses were, between 2015 and 2017, double those recorded between 2003 and 2005.
François Villeroy de Galhau: The role of monetary policy Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Global Interdependence Center – Central Banking Series “Inflation expectations, implications and policy response in a new paradigm for commodities”, Session I “Central bankers outlook”, Paris, 21 March 2016. *  *  *  Since the financial crisis, central banks have been tested on several levels: their ability to keep the transmission channels of monetary policy active; their ability to deliver on price stability; their ability to support the economy. Central banks in many jurisdictions have done a lot to reach their objectives. And their role has largely been hailed as positive in exiting the crisis. But faced with inflation remaining below the target, commodity markets going persistently through bear territory and growth momentum losing steam, central banks’ action is now called into question: how effective is monetary policy and how effective can it be in the future? Aren’t central banks running out of ammo? Monetary policy faces challenges, that is true; but these challenges can be mitigated. Central banks have proven that they were ready to do their part; but my conviction is that they cannot remain the only game in town. Let me focus my remarks today on the case of the euro area. Jeffrey [Lacker, President of the Federal Reserve Bank of Richmond] will certainly give you more insight into the US situation.