ignazio visco : welcome address – “ financial stability and regulation ” conference welcome address by mr ignazio visco, governor of the bank of italy, at the 3rd bank of italy and bocconi university conference “ financial stability and regulation ”, online event, 17 march 2022. * * * ladies and gentlemen, friends and colleagues, i am delighted to welcome you to the third biennial conference on “ financial stability and regulation ” organised by the bank of italy and bocconi university. the conference takes place at a particularly difficult time : while we are still facing the complexities of the gradual phasing out of the policies implemented during the pandemic, new risks have dramatically taken centre stage. the russian invasion of ukraine has changed the macroeconomic scenario almost overnight. in the current situation, even financial stability faces significant risk from potential energy supply disruptions and their consequences for the real economy and intermediaries, as well as from dislocations in financial markets. amidst such profound uncertainty, amplification mechanisms may arise from multiple channels, due to the close interconnections within the global financial system. looking forward, beyond the dramatic events we are currently witnessing, technology as well as the transition to an economy with net - zero carbon emissions will continue to shape the evolution of markets and of both traditional and new financial service providers. while this evolution has the potential to make the financial industry more effective in supplying the services required by households and firms, intermediaries and investors need to learn how to manage the risks arising from digitalisation and climate change. on the regulatory and supervisory front, national and international authorities responsible for financial stability are themselves “ proactively adapting ”, by developing new approaches and instruments to identify, monitor and manage new risks. these issues will be discussed in depth during this conference, and i am sure it will provide an excellent opportunity to gain new insights from academic research. at the same time, the experience of policymakers and the challenges they face may help guide researchers towards the specific questions that it is of the utmost importance they address. in these brief opening remarks, i would like to mention some research questions raised by the interaction between monetary policy, financial stability and macroprudential policies, which i think should be explored over the coming years. in its recent strategy welcome address ignazio visco governor of the bank of italy 3rd banca d ’ italia and bocconi university conference, “ financial stability and regulation ” online event, 17

to prohibit any measures in support of countries in difficulty. 1 the tensions that emerged on the european sovereign debt markets starting in 2010, as a result of the global financial crisis and the considerable imbalances in greece ’ s public accounts, strongly affirmed the need for adequate european economic governance. specifically, the absence of mechanisms for managing a severe financial crisis of a euro - area member state generated uncertainty, lengthening the timeframes involved in providing support, increasing its cost and feeding the risk of contagion. the first response to the sovereign debt crisis was necessarily of an urgent nature. in spring 2010, financial support to greece was provided through bilateral loans on the part of euro - area countries ( greek loan facility ). shortly thereafter, as the crisis extended to other countries, two common mechanisms were established for the disbursement of financial support : the european financial stabilisation mechanism ( efsm ), which is limited in size ( €60 billion ) and is financed by the european union, and the european financial stability facility ( efsf ), which has greater lending capacity ( initially equal to €250 billion, then €440 billion ), is temporary in nature, and is guaranteed by the euro - area member states. the intervention strategy changed abruptly at the end of 2010 with the agreement between france and germany and with the council of the european union ’ s decision in the summer of 2011 on private sector involvement ( psi ) in restructuring greece ’ s debt. following this decision, in the autumn of 2011 the european banking authority ( eba ) published a recommendation asking the main banks to create ‘ exceptional ’ and ‘ temporary ’ capital buffers to address their exposure to sovereign debt. the council ’ s decision and the eba ’ s recommendation came before the establishment, in 2012, of the esm and the specification that private sector involvement would be limited to exceptional circumstances and would not be triggered automatically. outright monetary transactions ( omt ) by the european central bank were also introduced in 2012. these were conditional on the presence of an esm assistance programme. it is likely that, had the sequence of events been different ( introducing the esm and omt before the psi announcement and eba recommendation ), the effect on the financial markets would have been more contained. the establishment of the esm was accompanied by a special amendment to the treaty on the functioning of the european union ( art. 136 ( 3 ) ). the esm ’ s subscribed capital amounts to