The Banco de España’s functions: how do we serve society?
The Banco de España’s best-known functions are banking supervision and contributing to euro area monetary policy decisions. But our public service covers many more areas. In his first blog post, Governor José Luis Escrivá summarises the Bank’s main tasks.
The Banco de España is widely known among the general public. In the latest Sigma Dos survey conducted last summer, the vast majority of respondents (96%) said they had heard of it. However, when asked, they mixed up our functions, such as banking supervision, with those of other public authorities, such as economic policy. This is why I chose to focus my first appearance as Governor before Parliament
on explaining exactly what we do and why we are useful to society.
96% of Spanish citizens have heard of the Banco de España, but many do not know what it actually does. It is important to explain what it is for
What are the Banco de España’s main responsibilities?
Our functions can be arranged in six large groups, associated with various goals, as summarised in Figure 1:
Figure 1
THE MAIN FUNCTIONS OF THE BANCO DE ESPAÑA
SOURCE: Banco de España.
1. Designing and implementing euro area monetary policy
The European Central Bank (ECB) has adopted euro area monetary policy decisions since 1999. The Banco de España, like the other Eurosystem central banks, actively participates both in the Governing Council, where I myself contribute to the decisions taken on interest rates, and in the committees and working groups that prepare these decisions.
We also implement monetary policy in Spain, acting as the “bank to commercial banks”, i.e. by granting loans to and taking deposits from them, among other instruments. In addition, we manage Spain’s foreign reserves and gold reserves and perform delegated portfolio management for the ECB.
2. Supervising banks and guaranteeing the soundness of the financial system
Perhaps the Banco de España’s best-known function is banking supervision. Since the creation of the Single Supervisory Mechanism in 2014, the Banco de España has, together with the ECB, jointly supervised significant institutions – banks considered significant due to their size or economic impact – and directly supervised Spanish less significant institutions.
We also very actively participate in designing banking and financial regulation, at both global and European level, and we advise the Government on the design of legislation in these areas. In addition, we draft implementing regulations (Circulars) and resolve queries on existing legislation.
The Bank also identifies possible systemic risks and their transmission channels, overseeing financial stability and designing macroprudential policies which focus on risks to the financial system as a whole. We draw up and update bank resolution plans as well, preparing banks so that, should they fail, they can be resolved in an orderly manner with no impact on financial stability and at no cost to the taxpayer.
3. Overseeing the correct functioning of payment systems
In this area, we have the crucial task of ensuring that payment infrastructures (the system’s plumbing) function correctly. These include both wholesale payments (between financial intermediaries) and retail payments (between firms, households, general government, etc.). We also ensure the availability of cash countrywide and in any situation, by issuing and putting banknotes and coins into circulation and distributing them throughout Spain. We do this through our branch offices and operational centres.
4. Protecting bank customers
Our function here is to supervise banks’ conduct, making sure that customers receive fair and transparent treatment, implementing and enforcing legislation, monitoring advertising and settling complaints.
5. Acting as a financial agent of the Treasury
We manage the issuance of public debt and, through our headquarters and branch offices, sell public debt directly to the public through over 200,000 direct accounts. In addition, we manage more than 700 accounts that the Treasury and other public institutions use to make and collect payments, in over 40 million transactions per year.
6. Analysing the Spanish economy
This function takes two forms: our regular reports and publications and the economic and financial analyses of our researchers. We also collaborate with other Spanish and international institutions in training and research programmes.
In short, our functions play a key role in keeping the wheels of the economy turning smoothly, always putting the public at the heart of what we do. In addition, we have embraced features that are increasingly significant for central banks, such as sustainability and financial inclusion.
Our functions play a key role in the economy, always putting the citizen at the centre. Our challenge is to continue improving, especially in terms of efficiency, innovation, openness and transparency
In all these functions, we face challenges to keep improving, with a strong focus on efficiency and innovation. An example of the latter is generative Artificial Intelligence (AI), increasingly used at the Bank. This tool has helped me turn the presentation I made to members of Parliament into this text and prepare the accesible version for the visually impaired. Other focal points for the Bank are openness, transparency and accountability. Indeed, we are working on a new Strategic Plan, which I hope to tell you about in a few months’ time on this blog.
