By the way, let me remind you that the Spanish public debt to GDP ratio at the end of 2010 stood at 60%, well below those of other euro area countries. Allow me to conclude by addressing some of the doubts raised by investors, which it is our duty to try and resolve. The first message I wish to convey is my absolute confidence in the Spanish banking system’s solvency. The measures we have taken in the past for their restructuring are beginning to bear fruit (creation of banks, market orientation, downsizing, etc.) and the recently adopted measures, specified yesterday, along with the pressure we are exerting on our banks to increase their solvency, should raise confidence in our banks and dispel doubts about their present and future situation. It should be stressed that our asset valuation system is very demanding, both in terms of the classification of problem assets and of provisioning and write-downs. Savings banks, with exposure to the construction and real estate developers sector of € billion, have € billion of doubtful loans, in which the borrower is not paying interest or repaying the  BIS central bankers’ speeches  3  principal. As Banco de España requirements stand, banks have, in addition to the foregoing amount, to record as problematic the assets foreclosed in payment of debts. Even more, standard loans under special surveillance owing to weaknesses observed in them are also considered as problematic.
Expectations about house prices, which had started to lose momentum in 2006, changed and prices began to fall, in a much more unfavourable macroeconomic setting and with financial institutions much more cautious about extending credit given the rise in bad debts and provisions, and the tightening of funding conditions. In view of these problems, the Government and the Bank of Spain began to take decisive measures to tackle this “classic” crisis based on credit to the real estate market and to the abrupt change in cycle, as well as to the changes in the markets. Firstly, to address the uncertainty on funding markets, a programme was set up that would allow banks to issue debt with the backing of the State and the ECB started to inject liquidity allowing full allotment. Secondly, the Fund for the Orderly Restructuring of the Banking Sector (FROB) was created in 2009. With the FROB we anticipated the need to equip  BIS central bankers’ speeches  1  ourselves with an instrument to carry out a far-reaching restructuring of the savings bank sector. The scale of the savings bank restructuring process has been huge. Of the 45 previously existing savings banks, only 17 remain. The aims of the process were very clear. First, to take advantage of the concentration processes to restructure assets and correct the excessive fragmentation of this sector. Second, to reduce the excess capacity in the savings bank sector.