Financial stability and macroprudential policy

One of the Banco de España’s responsibilities is ensuring the stability of the Spanish financial system. To do so, it has an analytical framework and pre-emptive supervision mechanisms, among other tools, and can also adopt macroprudential policy decisions in the banking domain.

Financial stability is key to social well-being. A stable financial system will be able to absorb the impact of shocks and the materialisation of risks without the financial intermediation process being adversely affected and further damage being inflicted on economic activity.

Systemic risk builds up when financial imbalances in the economy grow. Their sharp correction could hamper the financial system’s smooth functioning, thereby affecting economic growth.

Macroprudential policy tools enable prudential authorities to address systemic risk by incentivising economic agents to prevent it from building up. In addition, should systemic risk materialise, the macroprudential tools allow buffers to be built up to absorb and mitigate its effects.

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Key publications

Banco de España publishes a Financial Stability Report every spring and autumn which analyses the main systemic risks and vulnerabilities, reviews the situation of the Spanish banking sector and reports on the latest macroprudential policy developments. The Financial Stability Review, also biannual, provides a compilation of specialised thematic articles.

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Macroprudential tools

Macroprudential policy tools allow authorities to address imbalances of a systemic nature that threaten the stability of the financial system. Macroprudential policy measures are mechanisms aimed at preventing and mitigating potential adverse effects arising from the materialisation of risks.

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Macroprudential stress tests

Macroprudential stress tests assess the aggregate capacity of the banking system to absorb the potential materialisation of economic and financial risks. The Banco de España regularly conducts stress tests, the results of which are disseminated through the Financial Stability Report.

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Coordination with other authorities

Financial stability has a multi-sectoral and international dimension that requires cooperation between different authorities. For this reason, the Banco de España works in coordination with other central banks, national supervisory authorities and bodies with responsibility for financial stability, at the national, European and global levels.

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Macroprudential regulations

The main regulatory basis for the macroprudential policy applicable in Spain is the national legislation transposing EU legislation on capital requirements for credit institutions and its technical development by the European Banking Authority and the European Systemic Risk Board.

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