by companies and can result in a net benefit for them. sudden hikes on both fronts may instead be dangerous, and smis may be the most affected. that's a further reason for consolidation. but these are market forces. we as regulators must ask ourselves whether regulation itself is such as to induce consolidation, without any explicit prudential reasons to do that. an excessive number of m & as may result in a reduction of market competition, in lack of diversity in insurance coverage, and may eventually feed the never dormant “ too big to fail ” issue. esrb, macroprudential policy issues arising from low interest rates and structural changes in the eu financial system. november 2016. is proportionality a solution? proportionality in the application of solvency ii could be a way out of these doldrums. it will be interesting to hear from you on this point. i think that proportionality is a good principle, and its application to the second and third pillar of solvency ii – that is governance and reporting – is certainly worth being discussed. for instance, in ivass we have been working a lot on the national implementation of the governance requirements set by solvency ii, and we have spent quite some time in thinking on how best to ensure their proportionate application, taking into account the needs of smis. following previous fruitful experiences, we see merits in an early involvement of the industry in this process. we shall be launching a public consultation soon. applying the proportionality principle to the first pillar – the capital requirement – is instead a more thorny affair. the forthcoming scr review led by eiopa and by the european commission might be an occasion to examine this issue. insurance companies could take advantage of the public consultation that eiopa is running. for sure, in the meantime we could make a better use of the existing prudential framework. for instance, the own risk and solvency assessment ( orsa ), on top of being used internally, can serve the purpose of improving the intensity and quality of the dialogue with supervisors. * * * to conclude, i very much hope that this conference could be of inspiration to the reflections and works that both regulators and insurers will conduct on this delicate issue. i wish everybody an interesting and fruitful discussion. thank you for your attention. designed and printed by the printing and publishing division of the bank of italy

towards ensuring the health of individual institutions or markets. but the way to organise the macroprudential function is still work in progress in particular on the role of central banks. there are different views on how to design such a framework and how they should relate to central banks, their governance structures and their monetary policy strategies. 2 this is essentially related not only to the difficulty to define financial stability in an operational way ( contrary to price stability ), but also to the number of authorities concerned ( central banks, bank supervisors, insurance supervisors, market supervisors, competition authorities, consumer protection authorities, ministries of finance, ministry of justice, see adrain, t. and h. s. shin ( 2011 ), “ financial intermediaries and monetary economics ”, in : b. m. friedman and m. woodford ( eds. ), handbook of monetary economics, vol. 3a, elsevier. see nier, e., j. osinkski, l. i. jacome and p. madrid ( 2011 ), “ institutional models for macroprudential policy ”, imf staff discussion note, sdn / 11 / 18, november and also eichengreen, b. et al. ( 2011 ) : “ rethinking central banking ”, committee on international economic policy and reform, september. bis central bankers ’ speeches resolution authorities ) and to the variety of possible tools often assigned to several objectives. central banks should undoubtedly assume important roles in macroprudential policies. central banks bring in essential expertise in analysing financial systems from an aggregate perspective. they also have proper incentives to mitigate systemic risk ex ante since central banks typically have to deal with the fallout from financial crises. last but not least, involving central banks in macroprudential policy should foster effective coordination between monetary policy and financial stability policies in a manner that preserves their autonomy. policy coordination is likely to become important in light of the strong mutual interdependencies between the financial and the real sectors and thereby between both policy functions. i will come back to policy coordination later on. a wide range of different approaches exist to institutionalise central banks ’ role in the new financial stability frameworks. the different approaches taken largely respond to countryspecific circumstances. a “ one size fits all ” approach simply doesn ’ t exist. this is also in the european union where individual countries have adopted different approaches. at the level of the european union as a whole, a new financial