Spain

Spain’s banking system has been steadily progressing since the last FSAP. The authorities have made a significant reform effort. Together with the economic recovery, and support by the European Central Bank’s (ECB) accommodative policies, the banking system has strengthened its solvency and advanced in reducing nonperforming loans (NPLs). It is critical to keep the reform process moving and to build on the advances made during 2012–16. The four areas where momentum must endure are (i) accelerated cleanup of legacy bank assets, (ii) further improvement in bank profitability and capitalization, (iii) rigorous management of interest rate and liquidity risks; and (iv) reform of the institutional framework for financial oversight.