ignazio visco : harnessing financial education to spur entrepreneurship and innovation speech by mr ignazio visco, governor of the bank of italy, at the special governors ’ session on “ advancing financial literacy through policy and research ”, 3rd oecd / gflec global policy research symposium to advance financial literacy, paris, 7 may 2015. * 1. * * introduction investing in education and knowledge is increasingly recognized as a key factor in ensuring sustainable and inclusive growth. in this process, the role of financial education is both important and wide - ranging. indeed, with specific reference to the subject of today ’ s symposium, the objective of advancing financial literacy should be set in the context of the fundamental goal of improving an economy ’ s growth potential by encouraging investment, increasing employment, enhancing trade and promoting competition. improving the investment environment for smalland medium - sized enterprises ( smes ) and their financing conditions is part of this strategy, given the fundamental role that they play in all economies as key generators of employment, income and, ultimately, growth. hence, it is essential to understand whether and how financial education might be a component in this strategy and what our role, as regulators, should be. 2. channels through which financial education is important for the innovation and growth of smes innovation is central to economic growth. the role of the state in promoting this is essential, but in the end innovation must be realised by companies themselves. there are at least two areas where financial education, in a broad sense, may have an impact on smes ’ innovation and growth : their financial structure, on one side, and their managerial skills and corporate governance, on the other. 2. 1 the financial structure financial literacy may help to improve the financial structures of smes through a better understanding of the great importance of the communication of information to financial intermediaries and markets. smes are characterised by obvious problems of asymmetric information. this creates the conditions for the primary role of banks in their financial structure, since banks are especially experienced in screening and monitoring borrowers ’ creditworthiness in order to address these information problems. the incidence of bank debt on financial debt is a bit more than 40 per cent in the euro area and one third in the us. in italy, where smes are more widespread, over 65 per cent of financial debt comes from banks. that this essentially reflects the conditions of our smes is easily concluded once we observe that for large firms ( those with more than 250

, as are iceland, liechtenstein and norway, is not a member of the eea, but over time it has stipulated over one hundred bilateral agreements with the european union ( including the free movement of goods and people, but not of services and capital ) and is required to implement the relative european regulations. depending on the scope of the agreement, ratification by all eu member states could be required. 4. if no agreement were reached, trade relations would be governed by world trade organization regulations. in this case, the most favoured nation ( mfn ) clause would apply, which prohibits any form of discrimination : each state undertakes to extend to every other state the same treatment granted to all countries with which there are no specific bilateral trade agreements. in practice, however, neither membership of the eea nor of a customs union seem realistic options. the former would impose the free movement of people and the obligation to implement the ‘ acquis communautaire ’, both of which the uk wants to abolish ; the latter, as well as laying down certain regulatory restrictions, would greatly curb the uk ’ s freedom to decide independently on its trade relations with other countries. the uk government ’ s notification of withdrawal makes a general reference to a ‘ deep and special partnership ’ with the eu, but effectively appears to exclude staying in the single market. the most likely scenario – if there is no change of heart – is that the uk will become a real ‘ third country ’ for the eu. under this hypothesis, the question is whether it is possible to reach at least a free trade agreement, which would benefit the common interest ; the notification letter expresses a desire for it to be ‘ bold and ambitious ’. at this stage, the nature, timeframe and contents of any future agreement cannot be predicted. negotiations are yet to begin ; the uk government ’ s stance will also depend on the outcome of the recently announced general election. we may imagine that the main topics of negotiation will be the trade of goods and, above all, financial services. there are free trade agreements with nearly one hundred advanced and emerging countries, including switzerland, canada and south korea. the agreement recently concluded with canada is particularly interesting since, as well as eliminating customs duties, it makes access to public tenders and investments easier and facilitates trade in services. if, or for as long as, there is no agreement, the trade relations between the eu and the uk will be governed by wto regulations, unless there are specific