mario draghi : modernisation of the global financial architecture – global financial stability remarks by mr mario draghi, governor of the bank of italy and chairman of the financial stability board, before the committee on economic and monetary affairs of the european parliament, brussels, 17 march 2010. * * * thank you very much for having invited me to take part in this important debate between european and national parliaments. international and regional cooperation and national political leadership are essential complements for achieving global financial reforms ; and the debate in this committee is really helpful for that purpose. it is ultimately national and regional legislatures, accountable to their voters, that must decide and implement reforms. the strains in the global financial system have eased considerably in the last twelve months : the banks are once again raising funds, asset write - downs have diminished. nevertheless, elements of fragility are still present in various parts of the financial system and risks, mainly related to the deterioration of traditional loan books, the bunching of refinancing needs in the next few years, and to new sources of risk such as sovereign risk. it is essential that we can count, in the years to come, on a fully restored ability of the banking sector to perform its essential tasks in the economy. we have come a long way towards strengthening the financial system since this crisis began. but we have hard work ahead of us to finish up. in my remarks, i will focus mainly on these forward challenges. but let me start by taking stock of where we have gotten to. three things have been important in getting us to where we are now : first, the recognition that, in a closely integrated system, we all sit in the same boat ; second, the leadership of the g20 process, in which the eu has played an important role, in agreeing objectives and timelines for substantial reform ; and third, the establishment of mechanisms, such as the fsb, to hasten and coordinate the policy development needed to meet these objectives. when i say we have gotten far, i am speaking to an unprecedented amount of international dialogue and co - operation on important financial system issues, and the resulting substantive changes that either have or are about to come into place. while many issues remain to be resolved, in europe, in the us and elsewhere, we are, collectively, fundamentally reshaping the framework for systemic financial oversight : first, top - down, system - wide oversight arrangements are being put in place at the national, regional and international level. these

regulation : bridging the gap in the collective interest ’, keynote speech at milan fintech summit, 2024 ; and r. de bonis and g. ferrero, ‘ technological progress and institutional adaptations : the case of the central bank digital currency ’, banca d ’ italia, questioni di economia e finanza ( occasional papers ) 690, 2022. number of positive effects, it also poses potential risks. 3 nbfis are often less regulated than banks, although they perform similar functions ; the rules are not always sufficiently harmonized, both globally and at eu level ; and finally, nbfis are deeply intertwined with banks, and increasingly so with digital players, products, and services. 4 finally, the financial system is facing new material risks stemming from climate change and the transition to a greener economy on a global scale. 5 this makes it necessary to define appropriate metrics for measuring climate risk, some of which go beyond the more traditional physical and transition risks and look at the network of weather events. 6 i hope that this brief overview has convinced you that the work of financial regulators across the world is complex but also extremely challenging and potentially rewarding, given the contribution that we are required and expected to make to a public good such as financial stability. in response to these changes, financial regulators have already taken a wide range of actions. focusing on the eu stance, let me just mention some of the most recent regulatory outputs, such as the market in crytpo - assets regulation ( micar ), 7 the digital see n. branzoli, r. gallo, a. ilari and d. portioli, ‘ central banks'corporate asset purchase programmes and risk - taking by bond funds in the aftermath of market stress ’, journal of financial stability, 72, 101261, 2024. for a detailed discussion of the opportunities and risks associated with the growth of nbfis, see l. f. signorini, ‘ non - bank finance : opportunities and risks ’, speech at the euromed workshop, 2019. see, for example, v. v. acharya, n. cetorelli and b. tuckman, ‘ where do banks end and nbfis begin? ’, nber working papers 32316, 2024 ; m. gopal and p. schnabl, ‘ the rise of finance companies and fintech lenders in small business lending ’, the review of financial