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The scaffolding that obscured the Bank of Spain for a major renovation was removed recently, revealing a newly-clean edifice. The bank’s chief is working to ensure those changes go more than skin deep.

Pablo Hernandez de Cos and his team are on a mission to repair the reputation of the central bank, still disparaged for its failure to crack down on a credit binge that culminated in a property crash and 2012 bailout.

The economist, who’s proven himself a forthright critic of government policies, is driving more research on “real-world” topics after Spaniards suffered through a devastating economic crisis, and making sure the Bank of Spain is at the table for Europe’s most important conversations about monetary and banking policy.

“The perception of central banks in general, like that of so many other economic agents, has been greatly undermined during the past decade,” Hernandez de Cos said. “Now it’s up to us to work to restore that lost reputation.”

At 48 years old, he’s among the youngest members of the European Central Bank’s Governing Council, and represents a new generation of leaders in Spain pushing to modernize the country’s institutions, including the monarchy, companies and politics. His efforts in the Bank of Spain come at a time that central banks globally are under attack and the value of technocratic “experts” is questioned by politicians.

Hernandez de Cos, who gave written responses to questions from Bloomberg, said his priorities are “strengthening the Bank of Spain’s clout and capacity to influence at the national and international level, and contributing to financial and macro-economic stability.”

Economists inside and outside the institution say his ambitions will require a major effort.

Many Spaniards still hold the Bank of Spain partly responsible for a crisis that cost them their jobs and left the economy in tatters. Two months ago, a parliamentary committee reinforced that assessment, saying it “failed miserably at stopping the credit bubble.”


Hernandez de Cos is “trying to bring back rigor and credibility,” said Lorenzo Bernaldo de Quiros, head of political consultancy Freemarket Corporate Intelligence in Madrid.

In June 2018, the conservative government promoted Hernandez de Cos to governor from head of the Bank of Spain’s research division. Unlike his two predecessors, he’s a career central bank official, and economists say that’s granted him independence from government officials in Spain. He’s proven outspoken, questioning government policies, budget targets and minimum-wage plans.

“We have the obligation to evaluate proposals that are on the table,” Hernandez de Cos said. “That forces us to express our opinion, which will sometimes have to be critical.”

Building on changes that he and research director Oscar Arce had already begun before getting the top job, Hernandez de Cos has integrated regional and global research for the first time in two decades, ending what some inside the bank referred to as a “Berlin Wall.” There’s also a push to weave in analysis of credit and other financial metrics, key for Spain after its bank-led crisis.

Structural changes in the world economy “oblige us to understand and monitor new risks," Hernandez de Cos said. “This requires more efficient, flexible and innovative central banks.”

He was recently appointed chairman of the Basel Committee on Banking Supervision, which sets global regulatory standards for banks. It’s a shift from his lower-profile predecessor, Luis Maria Linde.

Jesus Fernandez-Villaverde, a University of Pennsylvania economics professor, says Hernandez de Cos “understands the challenges of being a central banker in the 21st century.” Previous governors “lacked political independence and technical competence.”

The one-time adviser to the ECB’s Executive Board earned an economics doctorate at Madrid’s Complutense University. He joined the Bank of Spain as an analyst in 1997.

Researchers at the institution in Madrid still feel his presence. They hold a meeting every six weeks where about 60 Bank of Spain analysts debate current monetary policy, an initiative set up to mimic ECB Governing Council debates. While Linde wasn’t a frequent attendee, the current governor nearly always shows up and challenges the economists.

He then expounds that analysis at ECB meetings, ensuring Spain has a voice on the major policy issues.

In Oct. 2018, the Bank of Spain ended its status as one of the only European central banks not on Twitter. A January tweet acknowledged that the bank sometimes uses “Vatican-like language” and is known as a fusty Madrid “manor house.”

It may have been tongue-in-check, but Hernandez de Cos knows there’s a serious message underlying it.

To contribute to the “public debate on the economy, the Bank of Spain must also reinforce its transparency and modernize its communication,” he said.

To contact the reporter on this story: Jeannette Neumann in Madrid at jneumann25@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss, Lucy Meakin

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