from the crisis that buffeted its economy and banking sector. state intervention is much more limited in italy than in almost all other european countries, helping to remove the market ’ s perception of a risk considered high for the entire banking system. the costs for the public purse will be reduced by burden sharing among equity holders and subordinated bond holders. it will be possible to offset them against the proceeds of future sales of shareholdings. a necessary condition for benefiting from public precautionary recapitalization is the approval by the european commission of a restructuring plan drawn up by the bank. the injection of public funds into banca monte dei paschi di siena will presumably use up about a third of the €20 billion set aside by the government. there is more than enough room to address the recapitalization needs of any other italian banks that meet the conditions laid down in the decree, in the first place those relating to the results of a stress test. however, for other measures to be implemented the banks must be willing to apply for public support and to deal with the ensuing commitments. following the capital strengthening carried out under the fondo atlante, the senior management of banca popolare di vicenza and of veneto banca have been drawing up an industrial plan for their further recapitalization and relaunch, which will soon be presented to the supervisory authorities. the feasibility of a merger will be examined with a view to achieving cost savings and synergies capable of ensuring a return to profitability. the challenges for the banking system aside from the difficulties of some banks in particular, the banking system as a whole is called on to face new and demanding technological and market - related challenges, on which we have often reflected. this is not only a necessity for italy : a return to higher and lasting profits is a must for all european banks. the way in which branch networks are structured, services provided, and technologies used, must all be reviewed in a bold and innovative spirit. value creation in the banking industry has changed and continues to do so ; italian banks can no longer put off much needed restructurings and strategic reviews. only in this way can they continue to successfully attract investors ; only then can they continue to compete effectively and maintain their stability. in some cases capital strengthening on the market will need to continue, as is already happening for some large banks ; experience has shown that if requests for new capital are based on clear, ambitious and, at the

reached its lowest level since 2008 ; from the end of 2015 the stock of outstanding npls also began to diminish, albeit gradually. nonetheless, they continue to weigh heavily on the balance sheets of italy ’ s banks and there have been repeated calls for better, firmer and more comprehensive management of these exposures. last june bad loans and other npls on the balance sheets of italian banks amounted to €191 billion net of write - downs, that is 10. 4 per cent of total loans. including write - downs, npls came to €356 billion, a figure frequently quoted in debates, which refers to the face value of the exposures and accordingly does not represent their actual weight in banks ’ balance sheets. out of €191 billion of npls, net bad loans, i. e. exposures to insolvent debtors, amounted to €88 billion or 4. 8 per cent of loans. the remaining €103 billion pertained to situations in which regular repayments may resume, especially if the recovery gains momentum. the bad loan recovery rate effectively recorded by italian banks averaged 43 per cent over the ten years 2006 - 15, a proportion largely in line with banks ’ balance sheet figures. our studies point to a wide dispersion of recovery rates : for many banks the margin for improvement is considerable and must be rapidly exploited. the first two rounds of new bad debt reporting received and analysed by the bank of italy last year revealed that there is still some way to go in creating detailed and easy - to - access databases. in the two years 2014 - 15, recovery rates dropped to an average of 35 per cent. this was partly due to an increase in the number of positions closed following ‘ en bloc ’ market sales to specialized investors : in the ten years considered, the average recovery rate for these sales was 23 per cent, against 47 per cent for positions closed following standard procedures. the market prices of exposures should be assessed bearing in mind that they reflect the very high yields demanded by oligopolistic buyers, which also factor in the possibility of long recovery times ; in some cases the existence of a large proportion of long - standing bad debts, already amply written down, explain the particularly low selling prices. the large volume of italian npls has drawn the close attention not only of the supervisory authorities but also of international markets and observers. it requires careful management. the majority of bad loans are held by banks in a sound financial