procyclicality of credit supply, a key driver of many detrimental boom - bust cycles. the benefits of the ssm became visible even before it came in operation. the comprehensive assessment that preceded it has stimulated a substantial strengthening of euro area banks ’ balance sheets, setting the preconditions for their renewed ability to adequately finance the economy. the ecb and the national supervisors are working to gradually remove national discretions and heterogeneities. the final objective should be to further foster financial integration so that banks operate in a full level playing field. the single resolution mechanism ( srm ), the second pillar of the banking union, will be fully in place as of january 2016. ensuring the timely and effective resolution of failed banks is a crucial component of a stable financial system. by promoting better crisis resolution, the srm will also improve market discipline and reduce excessive risk - taking. the srm will make use of the harmonized tools provided by the eu bank recovery and resolution directive. the inclusion of a bail - in provision in the directive marks a radically new approach to resolving bank crises, whereby the necessary resources should be drawn first of all from the bank ’ s shareholders and creditors in order to avoid or minimize potential costs for the taxpayers. let me recall that bank deposits protected by the deposit insurance bis central bankers ’ speeches system are excluded from bail in. besides these deposits, other deposits held by individuals and by small - and medium - sized enterprises would receive preferential treatment with respect to other instruments. we are aware that the introduction of bail - in tools may have an impact on the banks ’ funding costs. in addition, in placing their securities, banks must be most careful to comply with the investor protection rules, since subscribers may be called on to contribute to the resolution costs. customers must be given exhaustive information on the characteristics of the different instruments, the riskiest of which should be expressly reserved solely to institutional investors. but resolution is just the final step when a financial institution is undergoing a crisis. recovery is as, if not more, important. in order to avoid having to resort to resolution – or, should resolution become necessary, to make it efficient and avoid undermining the provision of important financial services – banks are required to be prepared in advance to confront stress, and must make recovery plans readily available – a set of actions that the bank itself would undertake in order to restore or maintain its viability and financial soundness. it is the responsibility of supervisory authorities

##s a positive impact on the cost and availability of credit for firms and households. recent sharp fluctuations in financial and commodity markets are under close monitoring in order to assess their possible impact on the outlook for prices. at its meeting of september 3 the ecb governing council recalled that the programme provides sufficient flexibility in terms of adjusting its size, composition and duration ; it reaffirmed its willingness and ability to act, by using all the instruments available within its mandate, if necessary, in particular to counter an unwarranted tightening of monetary conditions or a material worsening of the inflation outlook. in italy, the recovery is expected to proceed at a moderate pace. more favourable financing conditions, following the very easy monetary policy stance that has resulted from the decisions progressively taken since the summer of last year, and increased confidence would finally also support domestic demand and capital accumulation. private consumption should also benefit from lower oil prices and stronger household income, boosted by government ’ s measures and by the improvements in labour market conditions. recent data bis central bankers ’ speeches on economic activity and households ’ spending go in the direction of confirming the overall improvement in growth prospects. credit conditions and credit quality credit conditions in the euro area continued to improve, albeit slowly, reflecting an easing in credit standards as well as an increase in loan demand. in july, both the annual growth rates of loans to households and non - financial corporations increased to 1. 9 per cent and 0. 9 per cent, respectively, while heterogeneity of credit conditions across countries has narrowed. in italy, credit demand among firms is picking up for the first time since 2011, while demand among households has also strengthened. however, both credit conditions and loan dynamics remain heterogeneous across sectors of economic activity. according to the bank lending survey for the second quarter of 2015, italian banks kept easing credit standards for both firms and households, as balance sheet and liquidity conditions have improved and competition among banks has increased. as a result, in july the 3 - month annualized growth rate of loans to firms turned positive ( 0. 7 per cent, from – 0. 2 per cent ) for the first time since november 2011 and the growth rate of credit to households further increased. however, despite improvements prompted by monetary policy measures, bank credit in the euro area remains subdued, partly as a consequence of high levels of non - performing loans ( npls ). this is especially the case for italy, where the volume of non - performing loans ( npls