sector at global level. more resources are needed to shoulder the costs of compliance, an area which has expanded considerably in recent years and whose legislative framework still requires work in order to make it more proportional. investment is required to exploit digital technology so as to improve the services provided to customers. to assist growth and make the allocation of resources more efficient, we need a more diversified financial system. the financial needs of firms that are innovative and active at international level cannot be met solely by banks. despite the progress made over the last few years, the role of capital markets is still too limited, also in comparison with the other large economies in continental europe. policies to support non - banking funding sources for firms should be pursued ; banks can accompany and benefit from these developments by expanding and innovating the range of services provided. looking ahead, the biggest challenge is that of technology, which is drastically lowering the cost of transmitting, processing and storing information and favouring the development of new forms of financial intermediation. entire areas in the financial industry, from payment services to credit supply, from trading in securities to risk management, have already been heavily affected in some countries by digitalization and the rapid growth in the market share of non - bank entities ( fintech ). additional competitive pressures will come from global firms at the cutting edge of technological innovation ( including the ‘ big tech ’ firms ), which can exploit their presence in very big markets. the authorities must ensure adequate forms of supervision for new intermediaries that take account of their potential and the risks associated with their activities. it is especially important to encourage both fintech companies and banks to pay due attention to the possible negative consequences of cyber - attacks in a system now steeped in digital technology. we are working alongside the other authorities and intermediaries on maintaining cyber security in the financial sector. we have also reorganized our supervisory department, creating dedicated structures for analysing fintech, with the aim of anticipating market developments and updating the methods and tools of intervention. * * * the prospects for the italian economy are less favourable today than they were a year ago. they are affected by downside risks, partly originating abroad, but which still primarily reflect italy ’ s own weaknesses, above all the uncertainty surrounding growth, the fiscal policy stance and the resumption of a credible path to reduce the burden of public debt on the economy. a high sovereign risk premium exacerbates the imbalance of the public accounts, undermines the capacity of

recent months by visco ( 2013, 2014 ), rossi ( 2013 ), and panetta ( 2014 ). bis central bankers ’ speeches furthermore, in recent years the banks have had to strengthen their capital bases. they were prompted to do so even more than by regulations and supervisors 5 by the recession itself ( in that capital must be proportional to the riskiness of assets ) and by the markets, where confidence in the banks most exposed to more risky sovereigns was faltering. over the six years italian banks expanded their core tier one capital by €50 billion, from €134 billion to €184 billion. this capitalization drive was sustained by raising equity on the market while at the same time retaining earnings – an arduous combination, as potential subscribers of the capital increases had to be offered the prospect of good future returns. the banks ’ shareholders were called on to bear the brunt of the problems of debtor firms, with loan write - downs totalling nearly €140 billion. from the banks ’ standpoint, the situation can be summarized as follows : before the crisis bank credit was abundant because funding on the wholesale markets ( mostly abroad ) was easy and because given low borrower risk no massive loan loss provisions were required. with crisis and recession, both of these conditions vanished, so the rational course for a bank, in the interest first and foremost of the savers who entrust their resources for prudent investment, is to slow or reduce lending to the firms perceived as riskier and step up investment in other, less risky and more profitable assets, such as government securities. banks ’ deleveraging was intensified by the sharp decline in credit demand from the less risky firms, many of which cut back or suspended planned investments. this straightforward analysis excludes the highly imaginative theory of “ malice aforethought ”. let us now consider a second hypothesis, namely “ negligence ”, i. e. the banks ’ culpable incapacity for sagacious, farsighted assessment of individual borrowers ’ creditworthiness. here, judgment must be more nuanced. the heterogeneity of behaviour among banks makes generic, summary judgment inadvisable. if we nevertheless intend to consider the system as a whole, it would seem to me that italy is in the grip of a perverse interaction between the structural characteristics of the corporate system and those of the financial system. in too many cases italian firms are not only small but financially