operating profits. profits fell overall by 40 per cent ; the roe on ordinary operations halved to 4. 5 per cent. the factors that are constraining bank profitability today will become more intense, responding to the recession with the usual lags. the commitment to curbing costs must be intensified and the economies foreseen in business plans must be achieved more quickly. the banks will be decisive in determining whether the crisis we are facing is more or less long - lasting, more or less deep. it is necessary to reconcile prudent management and capital soundness with the need not to deny financial support to firms with good potential for growth and a real ability to weather the crisis. it would be dereliction of duty if the banks and the bank of italy were to stray from the path of rigorous evaluation of creditworthiness. a healthy banking system is essential to growth ; it safeguards the savings entrusted to banks. however, it is equally important that in deciding on loans banks use all the information available, that they supplement statistical scoring methods which lose some of their predictive power at times of crisis with direct knowledge of customers and their real potential for growth and profitability in the long term. a banking system with local roots is of great value ; it needs to be exploited and where it has been lost it must be rebuilt. banks must take advantage of their grass - roots knowledge of customers and avoid over - reliance on automatic processes. there is ample scope for improvement. some banks, some of them large ones, are beginning to move in this direction, reviewing their organizational models and their decision - making procedures. what prudential supervision requires of banks capital italian banks ’ own funds are well above the regulatory minima and have remained so even through the worst of the financial crisis. the capital ratios of the leading banking groups increased in the first three months of this year. i have said, and i say again, that a strengthening is nonetheless necessary. it is not just a question of maintaining strong safeguards for stability ; we must compete on an equal footing with the foreign banks which have had to resort to massive injections of public money in recent months ; we must be prepared, as of now, to operate with a capital endowment that future regulations will require to be larger than at present. above all, capital strengthening is indispensable in order to face the deterioration in the macroeconomic situation without neglecting to give firms, households and the economy the support they need. during this phase the

the blame for the crisis. but because of never redressed structural weaknesses italy was overwhelmed by it, penalized more than others, to the point that today, owing to its slowness in overcoming its own crisis, italy itself has become a cause of general crisis. nevertheless, the gravity and complexity of the situation must not make us forget our strengths. the first of these is our head of state, whom i wish to thank both personally as a citizen and institutionally on behalf of the bank of italy. he is a beacon, an inspiration, an example. the second strength comes from looking back on what has been accomplished. in these six years we have done a great deal. the bank of italy has made outstanding contributions at domestic and international level to the efforts to cope with the crisis, to revamping supervisory action, to the design and management of european monetary policy, to the formulation and implementation of the reform of european and global regulation. the autonomy of the bank of italy has been essential for all this. the bank ’ s autonomy is not an end in itself. it is an essential element of the way in which the bank exercises the powers and performs the duties defined in its statute, the italian constitution and the european treaty. in exercising these powers, the bank is called upon to safeguard the common good, for it is always perceived as impartial and not subject to external controls or interventions. the general council does not represent private interests ; it does not intervene in matters for which the bank or its top management is alone responsible ; it oversees the bank ’ s administration, its management and its choices. i now take leave of the bank with a peaceful mind, with, i believe, your warm feelings that will accompany me to frankfurt. the new governor epitomizes all the best that the bank has produced in its tradition of training authentic central bankers. the bank ’ s organization is sound and strong. but you too – italy ’ s banking foundations and banking system – have done much in these years to cope with the crisis by increasing resources, making sacrifices, changing operating rules, and aligning incentives with results, and you deserve ample credit for this. bis central bankers ’ speeches it is, then, from the strength of some of our institutions, from the awareness that we have succeeded in accomplishing things that seemed impossible, that we draw courage, security, the belief we will succeed. but we are experiencing a historical discontinuity. we are moving towards a new european pact,