I will today refer to two which I consider to be amongst the most important ones. The first one relates to business model and structural weaknesses. Despite the low profitability being a wider structural European issue, the cost to income ratio of the Cyprus Banking Sector, which amounts to 76 percent as at June 2022 is significantly higher than the respective EU average of 63 percent, signalling serious cost inefficiencies relative to peers. Investment in technology is key in the efforts to unlock efficiency and bridge this gap by addressing chronic issues that dent profitability such as cost inefficiencies, limited avenues of income generation, competitive pressure from entities operating outside the traditional banking spectrum and changing customer demands and needs. The second one relates to the risks of climate change. The ongoing effort to reduce the dependence from Russian energy may increase the transition risks and as such banks shall enhance and adapt their climate risk mitigation strategies. The fact that some of the banks have started making tangible steps on this regard is a positive development, but they are still early on the learning curve. They must act more aggressively and more decisively to meet our expectations of incorporating climate-related and environmental risks into their overall risk management frameworks. Conclusion Let me now briefly summarise the main points of my remarks and conclude: The adverse geopolitical developments led to a significant and persistent increase in inflation, associated with output loss and elevated economic uncertainty.
Pablo Hernández de Cos: Graduation Ceremony - Centro de Estudios Monetarios y Financieros Speech by Mr Pablo Hernández de Cos, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, at the Class 2020/2021 graduation ceremony, Centro de Estudios Monetarios y Financieros (CEMFI), 1 July 2021. * * * Good afternoon class of 2021. Good afternoon dear colleagues and friends. It is a pleasure for me to participate in this graduation ceremony together with Juan José Fernández Muñoz, Coordinator of Studies and Programs of Universidad Internacional Menéndez Pelayo, Samuel Bentolila, Director of the Master’s Programme, and Rafael Repullo, Director of CEMFI. I would especially like to thank Juan José Fernández Muñoz for being here today. The partnership with Universidad Internacional Menéndez Pelayo, dating back to 2006, has been instrumental in improving our ability to attract excellent students and the quality of our graduate programme, and I am very grateful for this. The Master’s programme of the class graduating today was severely disrupted by the COVID19 pandemic. In early March 2020, just before the end of the second term of the programme, all teaching activities were moved online. During the summer of 2020 CEMFI made all the necessary investments and established a set of safety protocols to be able to go back to onsite teaching. These efforts paid off handsomely. Most courses this year were taught on-site, with a minimal incidence of COVID-19 and, fortunately, no serious cases at all.