Conduct rules and conduct supervision are valuable public goods are one of the cornerstones of a well-functioning market economy. The Banco de España is responsible for conduct supervision, an important activity with a clear vocation as a public good. Against this background, the Banco de España asked for an external evaluation of its conduct supervision with a view to developing this function so that it is fit to face future challenges.
This evaluation is one of a series of multiple reviews, that are part of the Independent Evaluation Office work program covering many aspects of the Bank’s multi-faceted work. The focus of the evaluation is on the assessment of the Banco de España´s supervision of banks´ handling of their customer relationships. It is an examination covering the key aspects of conduct supervision, as defined in its Terms of Reference 
(466 KB): strategy, methodologies, data and resources. It was carried out by an Evaluation Committee (or panel) composed of three independent experts of recognized standing in the field of conduct supervision: Stefan Ingves, Hanzo van Beusekom and Pedro Duarte Neves. The conclusions of the evaluation are set out in an evaluation report approved by the Banco de España´s governing council on 30 May 2024.
To undertake the evaluation, the panel defines a conceptual model supported by the following aspects:
Conceptual Model
In the report, the evaluators highlight the significant progress that the Banco de España has made in recent years in conduct supervision. Specifically, the panel agrees with the Banco de España’s move from a predominantly corrective and legalistic supervisory approach to a more forward-looking and risk-based one, although it finds that further work needs to be done. In this regard, the panel delivers a series of recommendations based on the conceptual model that are intended to contribute to the design and development of this approach.
The following table sets out the main recommendations grouped into four areas derived from the conceptual model.
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Detect and investigate
- Rebalance risk assessment, moving to the center of analysis market risks and relegate institution-specific risks to a second level through early identification of current and emerging risks that may affect consumers.
- About institution-specific risks, propose other indicators to complement the ones based on complaints. Explore governance and culture reviews at the institution level.
- Expand the supervisory toolkit to complement inspections. Examples that could be used more often are activities leveraging on the findings of thematic reviews, supervisory expectations, cultural and governance reviews.
Mitigate
- Look for opportunities to strengthen formal enforcement within the current legal framework and, where appropriate, advocate for legal changes to facilitate punitive measures in conduct supervision.
Efficiency
- Develop a strategic view on the IT approach to conduct supervision drawing on the most effective international practices
- Develop a set of internal indicators, especially those that measure the average duration supervisory actions in order to shorten them.
- Complement the traditional realm of economists and lawyers with people with other skills such as data scientists, risk analysts and behavioural economists.
Impact and reputation
- Develop a more proactive communication agenda that reinforce the dialogue with the industry in order to better communicate the supervisory expectations and the public to better inform them on consumer protection.
- Create, with a small number of supervisors regular working groups – or thematic events – specifically intended to share methods and tools, with the aim of identifying the best supervisory practices.
