Thanks to our policy, banks could count on an ongoing access to foreign currency balances. These measures can all be seen as an expansion of our regular open market operations with banks. In consonance with this tradition, our non-standard policy was first and foremost aimed at expanding that form of credit in volume and maturity. In July this year, we started to 2  BIS Review 150/2009  purchase securities outright as a vehicle for introducing further credit support. We intervened directly in the longer-maturity segments of financial markets by buying covered bonds issued by banks. When presenting this decision, I stressed that we were very much in the continuity of our open market operations, because we still had in front of us both the signature of the commercial bank issuing the bonds and the underlying asset itself. Let me focus more closely on covered bonds for a moment, as they are important for the euro area – and for Spain. Covered bonds are an attractive source of funding for banks because they have long-term maturities. They help control and rebalance the maturity mismatch between assets and liabilities in banks’ balance sheets. But they are attractive instruments of finance for investors as well. Unlike asset-backed securities, covered bonds do not involve a transfer of credit risk from the issuer to the investor. Credit risk stays with the originator, preserving the incentives for prudent evaluation and monitoring.
Consumption needs to be less dependent on perceived wealth gains, and investment to be more diversified, well beyond the construction sector. This will make participation rates more sustained. For what concerns the Spanish financial sector, it has long been a source of strength and national pride for this country. In many respects, Spain can be a leading example for global financial reform. I will say more on this later in my talk. Spain’s financial system has proved resilient to the shock in the early stage of the crisis. Supported by prudent regulation and supervision, the banking system in this country has built dynamic provisioning cushions during good times. And the traditional role of banking, founded on long-term relationships with customers, has largely been preserved. Looking forward, this is an important asset. But a solid future calls for some areas of adjustment in the way the financial industry behaves. The exceptional support of public policies will, at some point, have to be withdrawn. Private sector confidence in the future will need to replace policy intervention as the main spur of growth. The Asociación de Mercados Financieros and its members are an important link in the chain through which confidence will build and transmit to your customers. The obvious prescription for a sustainable return to stability is for many of you to simply look back at your past of prudent and sound management.