remedies the deficiencies brought out by the crisis, and to make the financial system fully operational again so as to ensure, in italy as elsewhere, the flow of resources needed to accompany and sustain the economic recovery. the process of stabilizing and strengthening the financial system and rewriting the rules is proceeding according to the calendar set by the leaders of the g20 and the financial stability board ( fsb ). the set of reforms, once enacted, should increase the financial system ’ s resilience to shocks, encourage the development of models for intermediation oriented to long - term results, and eliminate the incentives for excessive risk - taking by stimulating more far - sighted behaviour based on the sound and prudent management of intermediaries. concerns that the banking system will be unable to provide sufficient support to the economy are particularly strong in italy, not least because of the financial structure of our small and medium - sized enterprises, heavily dependent on bank credit and historically skewed towards short - term debt. the crisis can – and must – be an opportunity for resolute action to rebalance the structure of firms ’ liabilities. in their selection activity, banks must be able to assess firms ’ long - term growth potential, to assist them in their development. in this context, the contribution of foreign banks can be significant, especially in some segments of the economy. in italy today, the branches and subsidiaries of foreign intermediaries account for one fifth of all bank intermediation, a share comparable to that of many other advanced economies. an analysis of the past is useful not only to identify the contribution that foreign banks have made to their host markets – in terms of competitiveness, innovation and the quality and quantity of services provided – but also to outline their possible future contribution. this has several determinants : the types of foreign intermediaries, their business model, their objectives, their results and the impact on prices. the bank of italy is following these matters closely ; indeed, it could not do otherwise. i will therefore retrace some of the stages of the success story of foreign banks ’ expanding role in italy and highlight the difficulties that must be overcome so that this progress may continue to the benefit of the italian economy, and the implications for the bank of italy. 2. internationalization there are several reasons why a bank may decide to enter foreign markets : i ) to take advantage of the host country ’ s growth potential and thereby tap new profit opportunities ; ii

##bilities 6. 9 4. 9 4. 4 6. 2 5. 2 5. 5 5. 1 28. 6 1. 3 23. 0 1. 5 40. 9 4. 5 15. 3 7. 2 4. 6 8. 5 20. 0 14. 5 7. 8 10. 8 securities held for custody source : supervisory reports. ( 1 ) average of the first 6 months of the year. some items may have different definitions from the past owing to changes in the reporting procedures. figure 1 number of foreign banks present in italy ( with reference to bank branches and subsidiaries ) changes over the year total foreign banks of which : branches - 10 source : supervisory reports. figure 2 loans by eu banks to non - residents ( amount by residence of counterparty as a percentage of total outstanding loans ) other euro - area countries remainder of the european union se pt. - 9 m ar ch - 9 se pt. - 9 m ar ch - 9 se pt. - 9 m ar ch - 0 se pt. - 0 m ar ch - 0 se pt. - 0 m ar ch - 0 se pt. - 0 m ar ch - 0 se pt. - 0 m ar ch - 0 se pt. - 0 m ar ch - 0 se pt. - 0 m ar ch - 0 se pt. - 0 m ar ch - 0 se pt. - 0 m ar ch - 0 se pt. - 0 source : european central bank. ( 1 ) outstanding loans granted by banks having their registered office in the european union to non - institutional customers resident in other eu countries. the counterparties do not include monetary financial institutions.