its intrinsic tendency to complacency. three intrinsic weaknesses need correction. first, the transparency of the financial structures needs to be enhanced. financial innovation cannot be built upon – and exploit – gaps in investor information and lack of financial literacy. all institutions, instruments and markets of any relevance for systemic stability need to enhance risk disclosure. second, short - termism in the design of financial contracts. market participants were given strong economic incentives to focus on short - term profits. “ due diligence ” was not a concern in the pre - crisis world. collectively, this has resulted in excessive risk taking. third, and perhaps foremost, the pro - cyclicality of the financial system needs to be mitigated. the quality and quantity of bank capital and their liquidity buffers have to be improved in good times to provide a sufficient buffer for bank equity to withstand the inevitable increase in credit risk when the cycle turns. the cyclicality of market economies is inevitable. but the financial system should not be allowed to amplify swings. these three points – and others – are now in the mission of the g - 20, the new prime forum of international cooperation. the g20 has entrusted many of these tasks to the financial stability board – headed by mario draghi. the business activities that you represent here should benefit from financial reform. lenders will be made more attentive to the real economic prospects of their borrowers. long - term value creation will – once again – be the criterion for granting credit to the economy. structural change entrepreneurs will be important actors of structural change, my third way forward. here we can build on assets that have made our real economies in the continent successful : our openness to trade ; our balanced and dynamic business structures ; our talented and well - trained workforces. none of these factors is single - faced. i mentioned already that the openness of our economies has been seen as a major challenge. greater openness has meant that our economies have been more exposed to the international crisis. but the past trend to global trade integration has already called for a major adjustment in the euro area production patterns. many countries in the european union have adjusted their export portfolios according to the technological advantages of advanced economies. in italy, about half of the firms with 20 or more employees are engaged in restructuring. many of them are consolidating their technological edge and diversifying their markets. they have moved towards products that are more skill - intensive and more capital - intensive.

and industry more content ”. between, say, 2005 and much of 2007 the system was quietly sliding into a state of metastability. a system is meta - stable when any external shock – even a trivial disturbance – can tip the balance of stability and trigger an avalanche. when, on 15 september 2008, lehman brothers filed for bankruptcy, the turmoil that had started a year earlier turned into an avalanche. the system moved into a chaotic state, mathematically and metaphorically. the crash in times of financial panic, banks and other financial intermediaries have an instinct to change the composition of their assets. they shed risky and illiquid investments and rush to liquidity. in the process, banks ’ intermediation is reduced, and loans to companies are curtailed. if the process is let unfold in a disorderly manner, it can create severe damage for borrowers and for the broader economy. after the demise of lehman, liquidity hoarding was so intense that we feared bank intermediation would suffer a complete and lasting collapse. the ecb was the first central bank in the world – a whole year before the lehman crisis – to recognise the severity of the situation. as the failure of lehman precipitated the crisis, the ecb took several measures to protect against a disorderly correction in credit and liquidity conditions. the ecb provided liquidity in unlimited volumes and with longer maturities. we insured banks against present and future liquidity shortfalls. you know that the flow of credit is primarily channelled through banks in the euro area. a complete breakdown in the funding relationships that constitute the inter - bank market for liquidity would have derailed the bank lending channel altogether. the interruption of the bank lending channel would have turned the financial crisis into a profound depression. by granting unlimited access to central bank liquidity we put banks in a position to maintain their crucial role in the financing of the real economy. by reducing the interest rate at which banks can borrow liquidity from us we facilitated the transmission of our credit support to the economy. as i speak, the funding ability of banks appears no longer to be a restraining factor for bank lending. since the second half of last year, easy funding conditions have been supporting banks ’ core business : making loans. we still see – in our bank lending survey – a residual slight prevalence of banks declaring a tightening in their credit standards for loans to enterprises. but this is now entirely due to macroeconomic uncertainty. a number of