mario draghi : 2009 world savings day address by mr mario draghi, governor of the bank of italy and chairman of the financial stability board, on the occasion of the 2009 world savings day, at the association of italian savings banks ( acri ), rome, 29 october 2009. * 1. * * the new regulation of finance conditions in the financial markets have been improving steadily since last spring. banks are again raising funds in the private bond and share markets. the risk premium indicators are coming down. however, neither risk premiums nor funding costs have come back to their 2007 level, and there is no reason to think this will happen any time soon : the market has not forgotten that the crisis was the consequence of its own recklessness. nor is it desirable that it should happen. the magnitude of the economic policy response to the crisis testifies to the severity of the trauma. things will not be the same as before, and all financial market participants, starting with the banks, would do well to recognize this. the financial stability board is proceeding with the design of new regulatory arrangements that can give us a financial system with more capital, less debt, controls covering all intermediaries that may potentially generate systemic risk, mechanisms to limit the cyclicality of the financial system, and methods of governance and executive compensation designed to reduce the incentive for excessive risk - taking. in a word, a more prudent and more stable financial system better able to sustain the economy. we need to introduce new rules to improve the quality of capital and to curb the excesses of leverage, including the imposition of a leverage ratio. there will be major corrective measures to mitigate the procyclical tendencies of the system. banks will be required to build up a capital buffer during the expansionary phases of the cycle to draw on at times of generalized difficulty. it has already been proposed to mandate a significant increase in the capital charges on trading activities and exposures to securitization instruments. the basel committee has begun work on the comprehensive revision of the notion of regulatory capital. for now, the orientation is towards a restrictive definition of core tier 1 capital, which for public limited companies should be limited essentially to common equity and reserves. all deductions, under this approach, would be harmonized according to extremely rigorous criteria and applied exclusively to the highest - quality capital component. limited derogations to take account of the specific characteristics of cooperative societies are under discussion. by the end of the year the

the mafia and other criminal organizations, during periods of crisis – when firms and the financial system are most vulnerable to criminal infiltration – action against money - laundering must be even more vigilant and vigorous. strict compliance with the anti - money - laundering rules is not only a legal obligation ; it is also vital to banks ’ reputation. the financial intelligence unit and the bank ’ s supervision departments have stepped up their controls, including at bank - branch level : the complementary relationship between prudential supervision and the fight against moneylaundering is being implemented within the bank ’ s own organization. collaboration with the judiciary and the finance police continues to be efficacious. but only if top management itself fully takes up the aim of combating crime can banks establish the organizational arrangements that provide the chief defence against moneylaundering. in connection with the so - called fiscal shield for the disclosure of foreign assets, an interpretative measure is called for to clear up all uncertainty over intermediaries ’ obligation to report suspicious transactions and reaffirm the regular application of the anti - moneylaundering legislation. 4. the role of the banking foundations the foundations have been an anchor for italian banks. they have accompanied them through the worst storms of the financial crisis, strengthening their capital and reserves ; they are supporting them now in the weak recovery that is projected. many have accepted sacrifices in the short term, thus contributing to the soundness of the system, the ability of banks to supply credit to the economy, and the enhancement of their own investment in the long term. the crisis has shown how the foundations can go beyond the function expected of institutional investors, which have an authoritative voice while clients are entrusting them with savings to manage, but their voice fades and dies away when savings are withdrawn. the foundations ’ voice does not follow the ups and downs of the markets, and their gaze tends to focus on the medium - long term. the crisis has clearly demonstrated the limits of the short - term view, dominated by the rush towards higher and higher returns and exorbitant management fees, which in general have now fallen. following the important mergers of two years ago, the italian banking system needs stability to meet the management and strategic challenges that exiting the crisis will pose. it needs the foundations to continue to accompany the strengthening of capital and reserves and to persevere in the role of shareholders who are present but do not interfere with management, which has been the basis of their success in recent years.