that poses the problem of how and when normalizing monetary policy. on the second point, a challenge relates to possible spillover effects on emerging - market economies of changes in the monetary policy stance in advanced countries. large capital flows went to emerging - market economies in the last years, in search for yield, putting upward pressure on asset prices and exchange rates in those economies. they might suddenly reverse when monetary conditions change in advanced economies. the risk is that the process becomes disorderly, with impaired liquidity in certain markets or asset classes, rapidly diffusing contagion to other correlated asset classes. these risks call for clear and effective communication strategies by central banks, while the authorities in emerging economies should further strengthen policy buffers and further advance structural reforms. another delicate policy challenge regards the relation between monetary and fiscal policies. the combination of high public debt – accumulated in many advanced economies in response to the financial crisis – and very low interest rates has strengthened the interdependencies between the two policies. exceptionally low nominal interest rates have contained debt servicing costs, and that ’ s good news ; the flip side is that fiscal positions are highly exposed to changes in the monetary policy stance, especially if changes are abrupt. finally, what if the current low interest rates were the new long - run equilibrium? in this case i would see serious challenges for monetary policy management. central banks might more often encounter the zero lower bound on nominal rates, which would imply less room to maneuver the policy rate to counteract deflationary shocks. the economy would be less resilient to negative shocks. central banks might have to increasingly resort to what we call unconventional policies. but we do not know how effective these tools are as a normal business cycle stabilizer, and what macroeconomic risks they might entail. let me conclude signaling another risk. economic policies became exceptionally accommodative after the financial crisis in order to save the world from another great depression. financial panic was destroying households ’ and corporates ’ confidence and curtailing aggregate demand, so macroeconomic policies, both fiscal and monetary, had to fill the gap, as long as needed. the phase of very low nominal interest rates has been necessary, and still is necessary in many areas of the world including the euro area, in order to support growth, fight deflation risks and sustain employment. but low growth, and the ensuing low interest rates, risk feeding on themselves if allowed to linger for too long : households may eventually feel compelled to save more

“ evolving landscapes of bank and non - bank finance ” banca d ’ italia - lti @ unito conference panel on “ institutional investors ’ asset allocation and the real economy ” opening remarks by the deputy governor of the bank of italy fabio panetta carlo azeglio ciampi centre for monetary and financial education rome, 7 december 2018 i am very happy to be here today at this joint banca d ’ italia - long - term investors conference on the evolving structure of bank and non - bank finance. as the first session already highlighted, the conference provides useful indications on how to stimulate firms ’ access to market finance, alongside the traditional banking sector. my role today is to chair the roundtable on “ institutional investors ’ asset allocation and the real economy ”, which focuses on how institutional investors can contribute to expanding the range of services and the volume of financial resources available to businesses. the panel will benefit from the contributions of distinguished participants, who will share their experience in the field with us. but before we start the discussion, let me briefly explain why, in my view, it is crucial that institutional investors play a larger role in funding the real economy. the global financial crisis of 2008 was triggered and amplified by developments in the banking industry. 1 in the preceding years, banks had increasingly adopted the “ originate - to - distribute ” model, so that instead of holding the loans they had originated on their balance sheets, they transferred them to third parties. this weakened incentives to carefully screen and monitor debtors. loans were repackaged and passed on to other entities, but in many cases the risks ended up being borne by banks ’ off - balance sheet vehicles and conduits. the rapid expansion of the banking system made the real economy highly vulnerable to financial shocks. the risks connected with an overstretched banking sector emerged fully during the financial and sovereign debt crises. since then, regulatory action has been taken to rein in the banking sector. wider and tighter prudential requirements at the global level2 and, in europe, the single supervisory brunnermeier, m. k., “ deciphering the liquidity and credit crunch 2007 – 2008, ” journal of economic perspectives 23 ( 2009 ), 77 – 100. the main regulatory changes adopted after the crises include higher capital requirements, the introduction of liquidity requirements and a minimum leverage ratio. mechanism, the single resolution mechanism and the bank recovery and resolution directive are acting to discourage excessive risk taking by banks. the burden of bank