mobile devices. this poses a serious threat to traditional banks. the only factor that keeps borrowers and lenders tied to a traditional bank is trust, based on familiarity with other human beings behind a counter or even based purely on a brand. this is an imponderable factor, one that is difficult to predict. certainly, the banks will have to give much more importance to the digital distribution channels and radically alter the way that client data are analysed and stored. substantial investment in technology and human capital will be necessary. another option for traditional banks is to acquire one or more fintech companies, as seems to be happening with payment services. smaller banks could team up with fintech companies and outsource some of their own business, as has happened in many english - speaking countries. fintech also raises questions and problems for those with a public responsibility as financial regulators and supervisors. there is a risk, for instance, of enlarging the boundaries of shadow banking, that is financial entities that elude any kind of supervision. progress cannot be stopped, but it should be pointed in the right direction in the public interest. we are already considering the best approach to take. the system ’ s transition the financial crisis, the global reaction that widened and hardened the perimeter of banking regulation, the tumultuous developments in technology and in the market and, in the case of italy, the long - standing problems in the structure of the economy require that our financial system be transformed. the changes are already under way, and the system is in a state of transition. throughout the euro area, the banking system has progressively consolidated since the crisis. at the end of last year, the number of banks was just over 5, 000, a drop of 25 per cent compared with eight years ago, while the number of residents per bank branch has grown by more than 30 per cent. in italy, the first figure is in line with the euroarea average, while the second is lower ( 19 per cent ), but nonetheless considerable. similarly, the productive capacity of italy ’ s banking industry is no more excessive than that of the euro area. at the end of last year, the number of residents per bank in italy was about 100, 000, much higher than the average of 67, 000 in the euro area and 48, 000 in germany, even if the number of residents per bank branch was lower : about 2, 000 compared with 2, 300 in the euro area and 2, 600

balance sheets. however, low market interest rates on foreign currency loans mitigated, to some extent, the increase in the debt - servicing burden of borrowers. in an environment of rising interest rates on foreign currency loans, this could have affected a significant proportion of the private sector and could have posed a systemic financial stability risk in countries where foreign currency loans accounted for a large share of total domestic lending. in addition, the major role played by foreign currency lending has posed some challenges for the conduct of monetary policy. in particular, the existence of a large stock of loans denominated in foreign currency has weakened the ability of monetary policy to influence the economy through the interest rate channel. furthermore, central banks might have become hesitant to alter their policy stances in the light of the possible adverse implications for financial stability stemming, for example, from a downward pressure on the exchange rate. a number of countries in the region have made attempts to address the risks related to rapidly expanding foreign currency lending to unhedged borrowers. as standard policies aimed at decreasing interest rate differentials and developing domestic funding markets might take too long to achieve this goal, some countries in the region have introduced different monetary policy, regulatory and administrative measures 9 to address the risks see ebrd ( 2009 ). see, for example brown, kirschenmann and ongena ( 2010 ). examples of these are : ( i ) a differentiation between minimum reserve requirements on bank liabilities in domestic and foreign currency ; ( ii ) higher risk weights and provisioning rates on loans in foreign currency ; stemming from increased foreign currency lending. practical experience with these measures reveals that their effectiveness has been somewhat limited for a variety of reasons. in particular, persistently wide differentials between interest rates on loans in domestic currency and those in foreign currency have fostered demand for foreign currency loans, while shortages of domestic savings denominated in local currency together with intense bank competition underpinned their supply. 10 in fact, as parent bank financing continued to be mainly denominated in foreign currency, local subsidiaries avoided currency mismatches on their own balance sheets by lending in foreign currency. in addition, when domestic lending in foreign currency was made more costly, it was circumvented by cross - border lending. recently, authorities in some european countries ( e. g. austria and hungary ) introduced stricter measures to limit further increase in foreign currency lending to domestic households. these measures are mostly of an administrative nature and set limits on