This is a challenge that calls for the involvement of all levels of government. From this standpoint, it is very important to adapt the analysis of public finances and its economic policy implications to the current Spanish situation, marked by highly decentralised public spending. Leaving aside the transfers between different tiers of  BIS Review 117/2006  5  government and interest payments, which reflect past financing patterns, the volume of spending by territorial governments is almost two and a half times that within the State sphere. Such a figure shows the enormous increase in the role of these agents, which has significant consequences for budgetary policy conduct, both in terms of its contribution to macroeconomic equilibrium and as regards its influence on the economy’s growth capacity in the medium and long run. From the standpoint of the contribution to macroeconomic equilibrium, the initial data on the regional governments' budgets for 2007 point to a balanced budget target for the year. We might wonder, however, whether the macroeconomic situation I have described, at a cyclical juncture marked by a prolonged expansion, would require the setting of somewhat more ambitious targets, in line with the spirit of the new Budgetary Stability legislation, even though these are only legally binding as from the 2008 budget. Also, from the standpoint of their contribution to long-term growth, the role of the territorial governments in managing the public spending items of most relevance for improving the Spanish economy's competitiveness acquires considerable importance.
Against this background, the Banco de España has a tradition – one that I think it is comprehensively successful – of conferring high importance in its supervisory work to monitoring the rigour of financial information and of the models used to calculate riskweighted assets. Naturally, it is our wish that these elements, which crucially affect the supervisor’s capacity to properly measure banks’ solvency situation, should be part of the common model adopted by the SSM and applied uniformly to all banks. A third significant challenge concerns achieving a fruitful framework of interaction between the SSM and the Single Resolution Mechanism. The regulations have set in place a complex structure in Europe, which includes the creation of a resolution agency (the Single Resolution Board) separated institutionally from the supervisor. This agency has been granted wideranging powers both in respect of the definition of resolvability requirements – which include the determination of a minimum volume of instruments capable of absorbing losses – and of  4  BIS central bankers’ speeches  the activation of resolution procedures for non-viable banks, as well as the selection of the most suitable tools to implement them. Resolution actions have direct consequences for financial stability, which is a public good that the SSM seeks to protect, and they turn on the more vulnerable banks, which are precisely those that require greater attention from the prudential supervisor.