overarching this management of risks. the first is capital : banks should have sufficient capital of good quality to withstand not only expected losses from activity ( which should be covered by provisions ), but also unexpected losses, so that the continuity of banks may be ensured in normal times and in crises alike. this factor was already of vital importance at the outset of the financial system as such, when there were no additional safeguards, nor any regulation of economic capital. the second and third factors are common ones, as they involve extra surveillance of a bank ’ s management of risks. the first check stems from public supervisory powers : a characteristic common to all financial systems is the existence of prudential supervision. the second stems from minor shareholders and bank creditors ( either holders of ordinary or subordinated debt, or mere depositors ), who exert scrutiny in what we know as market discipline. i am sure that these arrangements sound familiar to you : they are the three pillars of the new capital accord, or basel ii. but the great worth of basel ii is precisely the acknowledgement that these three levels are part of the structure which, since the very inception of financial systems, has promoted sound banking systems. the three pillars reflect well - known aspects of the workings of financial and banking systems over many years. and there lies the merit of basel ii. it has been able to identify these three elements and to integrate them so as to achieve regulation which is more closely aligned to the management of banks and which, therefore, is more efficient. let me conclude my remarks by raising the issue of corporate governance and transparency in deposit institutions, including savings banks. one could argue against paying much attention to corporate governance in savings banks, based on the lack of a shareholder structure. i do not agree. first, we should never forget that the issue of corporate governance is related not just to the minority shareholder issue, but also to that of companies raising resources from capital markets. second, saving banks may well need a sound corporate governance scheme precisely because of the special ownership and control structure. third, corporate governance that reinforces transparency is always an important contribution to increased efficiency. fourth, we supervisors see corporate governance as a way not just to safeguard minority shareholders, but also depositors, arguably the weakest part of the banking framework. as regards the efficiency of institutions, we all know that the application of appropriate corporate governance rules improves the quality of their management, their reputation, their stability and, by extension, their risk profile.

meeting their obligations. in sum, deposit institutions help reduce both adverse selection and moral hazard problems, while their ability to transform maturities allows them to provide liquidity. the enabling mechanism for the proper functioning of this system is depositors ’ confidence in deposit institutions. efficiency in savings banks among overall deposit institutions, savings banks undoubtedly play a significant role, contributing as they do to the distribution of market share among a bigger number of institutions, thereby fostering competition. likewise, in a sector whose cornerstone is depositors ’ confidence, properly run savings banks contribute to reinforcing the stability of the financial system. savings banks are an old and peculiar form of financial institutions, and display a set of particularities relating both to the significant social content of their action and to their strong regional roots. i shall address these two aspects. first, savings banks have, since the outset, been characterised by their contribution to preventing financial exclusion. that is to say, central to their objectives is a concern to ensure that the more disadvantaged segments of the population may have access to financial services. in this respect, savings banks have always paid particular attention to the financial needs of households and companies integrated into the social fabric. thus, by granting access to financial services to a large segment of society, they have made a considerable contribution to the increased efficiency of the financial sector and the economy. secondly, we should not forget that savings banks allocate a high percentage of the profits they generate each year to financing social projects. last but not least, the close relationship savings banks have with the region in which they are established is another of their differentiating and defining features. throughout their history, they have been clearly committed to strengthening the social and economic fabric of their heartland, thus becoming key players in regional development. this, in turn, provides them with greater retail customer loyalty, which no doubt offers a higher degree of stability for their business model. yet while all the foregoing is acknowledged and given the broad consensus that savings banks should retain their social commitments, i believe it should not be forgotten that, above all other considerations, they are deposit institutions. as such, and so as to promote the sound working of the financial system risk management, profitability and solvency should be at the heart of their concerns. indeed, it is precisely through controlling risks, maintaining acceptable profitability and a level of solvency appropriate to their risk profile that savings banks will be able to survive and prosper over time. it is only through operating properly as business