(745 KB)Promoting financial stability is one of the key policy tasks of the Banco de España. A stable financial system is able to absorb the impact of shocks and the materialisation of risks without financial intermediation being adversely affected and further damage to economic activity. The overall design and implementation of macroprudential policy by the Banco de España can be considered effective.
In particular, the framework for identifying potential systemic risks is consistent with those in other leading institutions. The Banco de España has an appropriate range of macroprudential tools at its disposal to address the identified imbalances. The toolkit includes both instruments to be activated as a result of the assessment of the financial cycle, such as the countercyclical capital buffer, and those dedicated to addressing risks to the financial system of a structural nature, such as, for instance, the capital buffers for globally and other systemically important institutions. The decision-making mechanisms leading to the adoption of the measures and their communication appear effective.
Moreover, the analysis and research underpinning the work is based on state-of-the-art methodologies. The biannual cycle of the Financial Stability Report (FSR) allows for continuous monitoring of the state of financial stability and of the appropriateness of the macroprudential measures in place, in view of the evolution of macro-financial conditions.
Lastly, the coordination of macroprudential policies with other authorities with financial stability responsibilities is appropriate. The Banco de España plays an active role in the relevant domestic, European, and international bodies.
At the same time, we identified some areas that deserve consideration for further improvement. We have split our recommendations into three sections covering: i) the output produced, ii) how the output is communicated, and iii) how the output is produced (processes and resources). Our 12 recommendations are listed in bullet points below, with further elaboration in the main body of the document.
We regard the Banco de España macroprudential function’s main challenge as related to processes and resources. In particular, the challenge is to ensure the adequate level and composition of resourcing while overcoming a certain siloed culture. This would allow the Bank to build further on the successes achieved so far and to establish a more solid foundation for further progress.
The output produced:
- Tailor the scenarios used in the Banco de España’s annual top-down stress tests more closely to the specific vulnerabilities of the Spanish economy.
- Continue the necessary preparatory work to be ready for the introduction of borrower-based measures (BBM).
- Strengthen the analysis of the non-bank financial intermediary (NBFI) sector.
How the output is communicated:
- Leverage the restructured communication teams for more targeted communication of key messages.
- Focus the FSR on key issues and aim to target it broadly. Assess success using both quantitative and qualitative metrics.
- Prepare a didactic, clear and direct communication strategy for the BBM.
How the output is produced:
- Explore the provision of greater high-level guidance on the work programme objectives for the area.
- Expand capacity through an increase in qualified staff.
- Evaluate internal processes with a view to streamlining them as much as possible.
- Increase the department’s Research Assistant resources to undertake more routine tasks and free up economists’ time.
- Enhance internal mobility to build greater cross-fertilisation of perspectives.
- Explore the establishment of cross-departmental task forces to address specific cross-cutting financial stability issues.
