the small average size of commercial firms, and the rigidity in the supply of innovative services. in many areas of the country this backwardness is aggravated by the size of the underground economy and in some cases by widespread illegality. modernizing italy ’ s payment system and integrating it in the wider european market will bring benefits far beyond those directly deriving from the introduction of new instruments and new technical standards. the changes now under way, boosted by sepa, will bring clarity and transparency to business relations throughout the 4 economy and not just in the payment sector. market players will be encouraged to revise their organization and code of conduct. the public sector will have the tools and procedures they need to improve payment transactions with firms and the public. in this way, the creation of a modern, competitive and reliable payment system in italy will help to build a more efficient and transparent productive system. in the 1990s, following the recommendations of the white paper on payment systems in italy, we successfully undertook a broad reform of interbank settlement procedures to bring the country into line with the most advanced european standards. today, we must take the opportunity offered by sepa to improve the supply of payment services in italy, with benefits for the public, firms and the public sector. this is the route we should follow. i hope that this conference will yield suggestions, observations and ideas for mapping the future development of italy ’ s payment system as part of the broader growth and modernization of italy in europe. thank you. payment services represent 15 per cent of banks ’ total operating costs. bis central bankers ’ speeches

to oversee each transaction. they can look to management for that. they do, however, have the responsibility to set the tone regarding their institution ’ s risk - taking and to oversee the internal - control processes so that they can reasonably expect that their directives will be followed. they also have the responsibility to hire individuals who they believe have integrity and can exercise a high level of judgment and competence. in the light of recent events, i might add that directors have the further responsibility to periodically consider whether their initial assessment of management ’ s integrity remains correct. interagency policy holds boards of directors responsible for ensuring that their organizations have an effective audit process and internal controls that are adequate for the nature and scope of their businesses. the reporting lines of the internal audit function should be such that the information that directors receive is impartial and not unduly influenced by management. internal audit is a key element of management ’ s responsibility to validate the strength of a bank ’ s internal controls. in the limited cases in which that function must be outsourced, best practice is to avoid using the same firm for the external audit as well. internal controls are the responsibility of line management. line managers must determine the level of risks they need to accept to run their businesses and must assure themselves that the combination of earnings, capital, and internal controls is sufficient to compensate for the risk exposures. supporting functions such as accounting, internal audit, risk management, credit review, compliance, and legal, should independently monitor the control processes to ensure that they are effective and that risks are measured appropriately. the results of these independent reviews should be routinely reported to executive management and boards of directors. both executive management and directors should be sufficiently engaged in the process to determine whether these reviews are in fact independent of the operating areas under review and whether the officers conducting the reviews can, indeed, speak freely. the level of independence from executive management that a board can demonstrate has, of course, become a far more visible and more important factor in evaluating corporate governance. recent audit failures have highlighted the value of sound practices, such as having audit committee members regularly meet privately with an institution ’ s outside auditors to discuss matters without management present. the recent conference board and new york stock exchange recommendations, or prior reports by the blue ribbon committee and the treadway commission in the 1980s describe best practices for audit committees and are worthy of your review. this summer, the sarbanes - oxley act took the matter of independence a step