Further, a new Guide to Banking Supervision has been drafted, setting down the procedures all SSM members are to follow. The SSM has been defined as an integrated system of bank surveillance, which will combine the leadership of the ECB with the active participation of national supervisory authorities. In any event, arrangements are in place to ensure that the assumption of these new functions by the ECB will not clash with its monetary policy responsibilities. As of June 2014, total euro area bank assets amounted to € trillion. Given the very high number of credit institutions (some 3,500) established in the euro area, the SSM regulation draws a distinction between “significant” institutions, which will be supervised directly by the ECB, and “less significant” institutions, which will remain the responsibility of national authorities and which the ECB will indirectly supervise. Finally, a list of 120 significant institutions has been drawn up, 15 of which are Spanish (14 once a merger currently under way has been completed), accounting for just over 90% of the assets of deposit institutions in Spain. BIS central bankers’ speeches  5  The 120 “significant” institutions represent 80–85% of total euro area bank assets; the Spanish banks that will be directly supervised by the SSM account for 14% of the total assets of these 120 significant institutions.
In the case of households, employment creation and wage growth might decline. As to non-financial corporations, the rise in their profits might diminish. The public sector would also see its balance of revenue and expenditure affected by the operation of the automatic stabilisers. That would all mean that both private and public levels of debt might ultimately be higher than expected, with further implications both for spending decisions and financial markets’ perception about the debt sustainability path. Logically, the deteriorating macroeconomic context would also affect deposit institutions. Compounding the fall in the value of some of their assets would be lower demand for credit. Moreover, asset quality might worsen, given that the ability of their borrowers to pay would be negatively affected. They would also face greater difficulty in continuing to jettison their non-earning assets. As a result, their income statements would be subject to downward pressures. This is particularly significant in a context, such as the present, in which banks are posting low profits. Against this background, it would be desirable in economic policy terms that, after the elections, a stable government were formed. That would lessen uncertainty over the future course of economic policies, give fresh momentum to structural reforms and see a resumption of fiscal consolidation, with the aim of improving potential growth and reducing the main sources of vulnerability in the Spanish economy, in particular high public and external debt levels.