the bank should hold a significant economic interest until maturity, was almost completely voided ; prudential concerns were overridden by the urgent desire to supply the economy with new credit from new institutions. as currently formulated, the law entails a risk of “ adverse selection ” and “ moral hazard ” : at worst, that is, a bank could foist its most impaired loans on bis central bankers ’ speeches an insurance company and then withdraw from the partnership. to keep this from happening, insurance companies will have to equip themselves adequately to assess the creditworthiness of a business, as if they were themselves banks. this is no easy task : it means having an additional technical unit, specialized in a task that has never been typical of insurance companies. very big companies could possibly do it easily enough, but the smaller ones will be exposed to the danger of being left in the lurch. ivass will have to authorize insurers that want to venture into this business ; it will do so by verifying the presence of technical - organizational arrangements that enable them to form an independent judgement on the loans to be acquired or granted. two days after the decree ’ s conversion into law, ivass held a public consultation on the implementing rules, which can be summed up as follows. the insurance company will have to submit to ivass a business plan that is wholly contemplated within the framework resolution on investment and that contains sufficiently detailed information to enable the authority to make its own evaluation and verify that the criteria set out in the law are met. in these assessments special attention will be paid to the extent and duration of the partner bank ’ s participation. if the insurance company does not intend to avail itself of the support of a bank it must describe the organizational arrangements taken for the screening and monitoring of borrowers and, using best banking practices, demonstrate its ability to understand and manage credit risk. within the macro class of “ loans, ” different investment classes are envisaged, to which specific caps and procedures are applied within the upper limit set by community law ( 5 per cent of the technical provisions ). the criteria introduced by ivass to distinguish between the various classes are, first, the presence and permanence of a partner bank together with a number of requirements relating to the borrower ( credit rating and the certification of the accounts ). the class of securitizations has been broadened to include “ loan securitizations ” which, along with others,

the single currency project. second, common supervision and a centralized resolution authority lay the basis for financial stability. banking union, together with other national and european policies – in particular, the monetary policy measures recently decided by the governing council of the ecb – is already contributing to the normalization in credit conditions for firms and households. the comprehensive assessment of the balance sheets of the largest euro area banks, which preceded the launch of the ( ssm ), enhanced transparency and dispelled doubts about the banks ’ resilience. further progress is expected as the ssm brings harmonization of supervisory and business practices, reducing investors ’ perception of risks. although complete normalization in credit conditions will likely require definitive exit from the crisis and a return to stable economic growth, signs of gradual improvement can already be discerned in the surveys conducted by the eurosystem and in other indicators. bis central bankers ’ speeches banking union has imparted a strong impulse to the efficiency of the financial system by fostering competition across euro area countries. consider for example the recent decree on the governance of the cooperative banks in italy. the initiative is the product of a good many years of reflection on the shortcomings of the cooperative structure for listed or very large banks ; at the same time, it can be read as part of a broader reform effort to bring the italian economy up to the best european standards of efficiency. 3. how to consolidate a promising start the important steps already taken need to be followed by further progress, on several fronts. since the list would be long, i shall mention just one general issue and two specific ones. the overarching issue : further progress towards european integration is essential. we should not forget that the current crisis was provoked, in part, precisely by lack of progress in european integration following the adoption of the single monetary policy. the bu project has gotten the process started again, helping to defuse the crisis. but we must not make the same mistake twice ; the integration process cannot be allowed to stall again. progress in this direction is particularly difficult at present, because national centrifugal forces seem strong. they are visible in various forms : growing support for anti - euro or euro - skeptical political parties in several countries, for one, and the difficulties encountered by european and eurozone institutions in discussing issues from an area - wide perspective, for another. national interests and perspectives are strong. take, for instance, the distinction between core and periphery, which has become standard in many