##ability has returned to pre - pandemic levels, it is still low, including by international standards. last year, the return on equity, net of extraordinary components, of italian significant institutions was 5. 4 per cent, more than 1. 5 percentage points lower than that of the other significant banks. the average profitability of italian less significant institutions with traditional business models is 1 percentage point lower than that of the larger banks. the steps to increase efficiency levels and the commitment to reviewing their business models must therefore not fall short of the mark. this situation, which is not negative on the whole, is exposed to new risks stemming from the conflict in ukraine. direct exposures to counterparties resident in russia, belarus and ukraine, which are concentrated in the two largest groups, are low. however, the indirect effects of the conflict are more difficult to assess. the marked increases in energy prices are affecting firms ’ financial conditions. banks ’ exposure to those operating in the sectors hit hardest by the price rises is not negligible, even though it should be noted that, on average, their default probability as reported by banks before the war was lower than for other sectors. a protracted conflict and heightened frictions in global value chains could also lead to a more pronounced cyclical slowdown than is currently expected and to a subsequent worsening of the financial situation of households and firms, making it necessary to operate prudently when classifying loans, booking loan loss provisions and distributing earnings. the deterioration of the cyclical situation could create serious problems for the banks more geared to typical credit intermediation, particularly for some small and medium - sized ones that are already finding it difficult to keep costs down and are struggling to benefit from economies of scale, to diversify their revenue sources and to raise the capital needed to invest in new technologies. the bank of italy ’ s supervisory action remains focused on encouraging these intermediaries to adopt a corporate governance able to define and implement business plans that are credible and consistent with the challenges posed by the market situation ; it is up to the management bodies to act without delay, including on the front of possible mergers, to minimize the risk that situations of difficulty turn into irreversible crises. a process to strengthen the role of institutional investors in the allocation of private savings has long been underway in the italian financial industry. more than one third of households ’ financial wealth is currently invested in banca d ’ italia the governor ’ s concluding remarks annual report 2021 asset management products

86. seventh, i would like to invite all banking sector colleagues to utilize indonesia ’ s demographic potentials with its large population and still relatively limited access to financial sector. bank indonesia, hand in hand, with the government is currently formulating a financial inclusion national strategy. this national strategy will serve as a framework consisting of strategic actions to open the access of unfinanced persons as well as unbanked persons to the financial sector. 87. lastly, to promote good governance, i am of the view that excessive risk taking which can potentially induce moral hazard as witnessed during the 2008 crisis needs to be prevented. on that note, compensation or remuneration structure of bank executives conducive to the development of professionalism and integration is needed. distinguished guests, ladies and gentlemen, 88. in addition to the policy direction i have described, we must also formulate medium to long term strategies. my view is that capital accumulation, both in the form of physical and human capital, and productivity improvement is key to boosting a balanced aggregate supply and aggregate demand. it is hoped that this ideal condition will lead to higher gdp and lower inflation which will in turn be followed with an increase in gdp per capita. 89. different speed of convergence to levels of developed countries is seen in the development of income per capita of several main asian countries. singapore has out - achieved developed countries since the 1990s decade, while korea is converging to japan following the 1997 – 1998 asia crisis. to illustrate, for the case of indonesia, the ratio of japan ’ s income per capita to indonesia ’ s income per capita is on a gradual decline since the 1990s decade, with a slight interruption during the asia crisis. this means that indonesia ’ s income per capita is catching up to japan ’ s income per capita. 90. according to the october 2010 imf ’ s projection, the ratio is estimated to further decline until 2015 and may continue onwards. however, further analysis shows that the speed of convergence to match developed countries is not yet sufficient. 91. bank indonesia study shows that in addition to low capital accumulation and productivity, the non optimal speed of convergence is also caused by most binding constraints in the economy. should these constraints be untangled, a more bis central bankers ’ speeches accelerated economic growth through increasing investment could be achieved. the five most binding constraints are : 1 ) insufficient innovation through research and development ; 2 ) a low standard quality of education and health ; 3 ) insufficient possession of information and communication technology