placing their securities, the banks must be especially careful to comply with the investor protection rules, since subscribers may be called on to contribute to the resolution costs. customers must be given exhaustive information on the characteristics of the different instruments, the riskiest of which should be expressly reserved to institutional investors only. today the bank of italy, as part of its financial education programme, has posted on its website an account of the rules that will soon enter into force in our country. with the implementation of the brrd, under the single resolution mechanism for banking crises, a single resolution fund will be established, to which euro - area banks will progressively transfer resources to finance resolution procedures. in particular circumstances, such as when the bail - in might entail risks for financial stability or compromise the continuity of critical functions, the authorities may, at their own discretion, exempt some categories of creditors from their obligation to contribute to the costs of the resolution. a backstop at european level still has to be designed, using public money to supplement the resources of the single resolution fund in order to deal promptly with any crises involving the largest banks. the recent report by the “ five presidents ” on completing europe ’ s economic and monetary union indicates, opportunely, that such a backstop is a priority, along with a comprehensive single deposit guarantee scheme that goes beyond the mere harmonization of national schemes. the capital market and finance to the economy the capability of the banks to take on risks has diminished and they have become more selective as regards borrowers. we need a more diversified financial system if we want to support investment and economic growth. some signs of change have emerged. new stock market listings are increasing, there is a growing volume of bond issues, including by medium - sized firms, the number of mini - bond issuers is rising, and the average volume of issues is declining. this last year has seen the introduction of various funds geared to investment in the debt instruments of small and medium - sized enterprises : at the end of june there were 23 such funds under the aegis of italian asset management companies, 15 of them already operational. other funds have been instituted by foreign managers. however, the capital raised by the italian funds is still scanty – under €2 billion. these changes, which stem partly from firms ’ difficulty in obtaining bank credit, were encouraged by public interventions, such as tax incentives for capital increases and the new rules on bond issues by unlisted companies. direct funding to the private sector

gradually being transmitted to credit conditions. in italy the interest rates on new business loans and home mortgage loans were down to 2. 2 and 2. 7 per cent in may, from 3. 1 and 3. 3 per cent in mid - 2014. for firms, the spread with respect to the corresponding german and french rates has narrowed by about half a percentage point. and since the middle of last year the improvement in credit cost conditions is no longer limited to the largest and financially soundest corporations. the contraction in lending to non - financial corporations has nearly ceased. in the three months ending in may the annualized decline came to half a percentage point, compared with a much faster decrease of around 3 per cent in the middle months of 2014. lending to households has begun to grow again, if only modestly. the timing and strength of the upturn vary by sector and by individual firm. lending to manufacturing and non - real - estate service firms that have no debt payment arrears has expanded, but credit to firms in construction and real - estate services, sectors where the overall risk remains high, is still diminishing. bis central bankers ’ speeches in the first quarter of the year the flow of new bad debts eased to 2. 4 per cent of outstanding loans, from an average of 2. 6 per cent in 2014 and 2. 9 per cent in 2013. the improvement was due to loans to firms, for which the new bad debt rate fell by 0. 6 points to 3. 9 per cent. the decrease involved all sectors of economic activity. credit quality remains poorer for construction firms and firms located in the south. at the end of march banking groups ’ bad debts amounted to 10. 2 per cent of outstanding loans and total non - performing exposures to 17. 9 per cent. the large volume of nonperforming loans continues to restrain the supply of credit and puts italian banks at a disadvantage with respect to their european counterparts. apart from the long recession, it reflects constraints and rigidities that oblige italian banks to keep impaired assets on their books much longer than banks in the other main countries. measures taken by the government last month will increase the speed and efficiency of bankruptcy procedures and property foreclosures. they make loan losses immediately tax deductible. in this way they act directly on some of the causes of italian banks ’ large stock of non - performing loans. accurate assessment of the measures ’ impact is hindered by the lack of official statistics on