, in implementation of the ecb governing council ’ s december decision. the bank of italy ’ s selection of the new collateral assets is subject to strict standards and controls, further refined of late. hopefully, banks will adapt in order to take full advantage of this opportunity. the eurosystem ’ s liquidity support measures were made possible by the credibility that its monetary policy had gained over the years and the stability of inflation expectations. the governing council ’ s decisions responded fully to the mandate of the ecb. it was essential to keep monetary policy from losing effectiveness and being transmitted unevenly in different countries. the brusque cessation of the flow of credit to the economy and the interruption of the orderly working of markets would have entailed extremely serious threats to financial stability. bis central bankers ’ speeches in europe, the safeguarding of financial stability is entrusted to the regulatory authorities and the central banks. macro - prudential oversight is the responsibility of the european systemic risk board, within which the central banks play a leading role. the primary objective of the eurosystem is to ensure price stability over the medium term ; under the treaty, it contributes to preserving the stability of the financial system. when financial stability is jeopardized, price stability itself is put at risk. monetary policy cannot redress all the imbalances within the euro area, but it can stop contagion, avert systemic crises and ease tensions. its contribution in sustaining markets and supporting liquidity remains essential. today, an exit from the present policy framework would be absolutely premature. the financial system and the bank of italy ’ s supervision since the outbreak of the crisis, italian banks have made considerable progress in strengthening their capital. they have turned to the market in difficult circumstances. since 2007 the core tier 1 ratio of the five largest banking groups has been raised from under 6 per cent to 10 per cent. for the other banks it has remained stable at around 10 per cent. based on risk analyses, the bank of italy has invited banks to take the necessary steps to maintain or achieve capital ratios well above the regulatory minimum. the advance towards basel iii is on schedule. in these years the stability of italian banks has been assured by a series of factors : low exposure to structured finance products ; regulation and supervisory controls to prevent excessive risk - taking ; low leverage by comparison with other banks in europe ; and a high proportion of capital instruments effectively capable of absorbing losses. contributory factors were the absence of any real -

ranging from education to justice and health. the task is to rationalize and prune the regulations and prevent total public expenditure from increasing. yet spending priorities can be revised, the budget balance remaining constant, for instance in favour of education and research. the country can ask its entrepreneurs to make an extra financial effort to strengthen their firms ’ capital when they benefit from a thorough streamlining of the regulatory and administrative environment. investment will benefit, the real economy will be more robust, firms ’ relations with banks will improve. economic policy action can be undertaken serially, one matter at a time, but the overall design and the stakes must be clearly communicated and reasserted. getting out of this tight spot will impose costs on all of us. they are bearable costs if they are properly shared and seen to have a clear purpose. the journey will not be short. italian society cannot avoid confronting a changed world in which no position rents are allowed. at the same time, politics must ensure the prospect of a profound renewal that nourishes hope and responds to the aspirations of the younger generations. bis central bankers ’ speeches