appropriate : • survey evidence suggests that the majority of consumers lacks financial capability in key areas, even in countries where there is a strong tradition of stock market participation as in the united states or the united kingdom. for poorer and less educated households the lack of knowledge is greater and has more serious potential consequences. • by improving financial education, policy - makers can affect economic behaviour. evidence shows a positive correlation between financial literacy and retirement planning abilities, the likelihood of buying risky assets and investing efficiently. • financial education is helpful but its impact should not be overestimated. regulations to protect consumers – such as by reducing conflicts of interest for financial advisers, introducing rules of disclosure, and making provision for investment default options – are complementary to financial education. for example, policies to increase the transparency of financial products can improve households ’ welfare both on the asset and liability side. regulation should be designed keeping in mind the trade - off between consumer protection and the inhibition of innovation. 5. conclusions the increasing complexity and interdependence of the world financial system is channelling resources to the most productive investments, thus supporting efficiency and growth globally. however, the financial system may also become, at times, a source of instability. policymakers are already adjusting regulation and supervision practices to deal with a rapidly evolving financial system ; cooperation to secure a level playing field and to reduce the scope for competition in laxity is required. coordination when intervening on interlinked markets is necessary. institutional and retail investors should be made aware of the new set of risks they are facing, in order to make informed decisions. crises can not always be prevented ; as recent events have shown, once they occur swift action can stem the damage and work towards restoring confidence. again, cooperation and coordination are the only way to deal with systemic events that have the potential to wreck the global financial system. indeed, while we recognize that an efficient financial market is a fundamental driver of economic growth, we are also aware that financial instability must be limited if it is not to hamper economic activity.

day liquidity management impaired signalling of the monetary policy stance. • the situation is more problematic on longer money market maturities, where a substantial premium on official rates has emerged. central bank interventions have been effective in avoiding market disruptions, but they could not address the lack of disclosure underlying these tensions, resolution of which requires additional information of the size and distribution of exposures, an assessment of the impact on banks ’ balance sheets, and the completion of the process of risk repricing. all in all, by their prompt interventions the central banks were able to preserve orderly market conditions and avert a liquidity crisis, without endangering the markets ’ medium - term expectations in a period of volatility and generalized uncertainty. 4. 2. strengthening the foundations of the financial system the ongoing financial turbulence has not come as a surprise. for some time the supervisory authorities had been emphasizing the increasing strains, stressing the rise in sub - prime mortgage defaults in the united states and warning that investors ’ perception of risk might have changed suddenly, leading to abrupt portfolio adjustment and destabilizing effects. but the interaction between the difficulty to value sf products, the evaporation of liquidity and the “ rush to exit ” to reduce risk exposure could not have been foreseen, and nor could the speed at which the crisis spread across institutions and markets. to tackle the fragilities highlighted by the current turbulence, the financial community has put a number of initiatives in place in recent months. in particular : • at the request of the group of seven, the financial stability forum ( fsf ) is reviewing several important issues such as the management of risks – especially liquidity risk – by the institutions subject to regulation, the appropriateness of capital requirements, the full consolidation of the assets and liabilities currently kept off banks ’ balance sheets, and the transparency and valuation of structured financial products. • the eu finance ministers have asked the economic and financial committee to examine a number of issues raised by the recent turbulence, analysing them in a way that is complementary to the mandate of the fsf by taking a european perspective and covering slightly different areas, including the implications of the new capital requirements directive, which implements the basel 2 framework in the european union. in fact, it was not properly anticipated that commercial banks could be the weak link in the system : other financial institutions, hedge funds first of all, were thought to be more likely candidates to set off a crisis. to some extent, the