##uses will be completed with the exercise of the delegated legislative powers provided for in the law on savings. the bank of italy has been consulted by the ministry for the economy and finance on a preliminary draft of the legislative decree and has submitted some observations concerning matters bearing on the banking sector. in particular, it has drawn attention to the need for a more flexible regime for the exemption of bank securities, where many of the rules do not have to be laid down by law but could be left to consob. the transposition of the mifid directive could be an opportunity to re - examine the question of conflicts of interest in the securities industry. the law on savings has introduced solutions intended to prevent conflicts of interest by imposing stringent constraints on intermediaries ’ organizational and operational freedom. 18 this choice diverges from the line followed by the community. according to the mifid directive, intermediaries are required to identify conflicts of interest themselves and adopt organizational arrangements capable of preventing them ; the regulatory authorities are controlling the effectiveness of the measures adopted and establishing appropriate transparency obligations. the minister for the economy and finance has recently consulted the bank of italy on draft criteria for the mandate to transpose the mifid directive. the document envisages solutions consistent with the orientation of the community. in line with the purpose - based allocation of functions, secondary legislation and controls concerning conflicts of interest would be entrusted to consob. this will require close coordination with the bank of italy, which would remain responsible for all the prudential aspects concerning intermediaries ’ organization and internal controls. 5. configuration and coordination of the regulatory authorities the configuration of supervision defined by law essentially reflects a purpose - based allocation of tasks. the bank of italy is entrusted with ensuring the stability of the financial system and with the controls on intermediaries ’ sound and prudent management, consob with the controls on transparency and proper behaviour for the protection of investors. the law on savings removed some exceptions to this approach, for example by bringing financial products issued by banks within the scope of the rules on investment services and public offerings. the same logic governed the transfer to the antitrust authority of responsibility for safeguarding competition in the banking sector. the purpose - based criterion for the allocation of tasks meets the needs deriving from the growing integration of the different segments of the financial market and makes the identification of the responsibilities of each regulatory authority clearer. the law provides, pragmatically and flexibly, for the

high social or political costs, which are even less straightforward to judge and to measure. still, this issue cannot be avoided. we need to think about what institution should be in charge of such evaluations, and acknowledge that it should comprehensively consider the evidence and assessments provided by credit rating agencies, national fiscal councils, international financial institutions and organizations. a tough assignment, indeed. to conclude, i have to confess that, in a sense, i have cheated you. my einaudi ’ s quotation was actually incomplete. he not only said that “ investors have the heart of a rabbit, the legs of a hare … ” ; he continued and said that they have “ … la memoria di un elefante ” ( “ the memory of an elephant ” ). this should be a reminder of the disruptive consequences of a default, which often permanently stains a government ’ s reputation. governments that default are excluded for potentially long periods from international capital markets, especially when bis central bankers ’ speeches markets consider the default opportunistic. they also face an increased cost of borrowing thereafter. finally, and perhaps most importantly, default also signals an overall lack of reliability of the country. a proper design of the conditions for the ex - ante involvement of creditors in an orderly restructuring of the debt of a sovereign borrower and the definition of appropriate incentives for a more gradual, timely and responsible market assessment would significantly reduce the probability of sovereign default and the risk of extremely harmful financial stress associated with such an event. bis central bankers ’ speeches