##nt fiscal policies but, most importantly, structural reforms aimed at regaining sustained gdp growth. the latter, in turn, would help make loans to households and firms more attractive, and reduce the share of government debt in banks ’ balance sheets. while there has been a heated debate about npls and sovereign bond holdings, much less attention has been paid on the risks deriving from the stock of illiquid and opaque assets in banks ’ balance sheets, including the instruments classified as level 2 and level 3 assets in the fair value hierarchy. these risks are not easy to measure, but available estimates put them broadly on a par with those associated with npls. the single supervisory mechanism has recently adopted some initiatives aimed at defining the most appropriate interventions to take adequate account of these risks. these efforts must be intensified. the increase in the cost of funding is the third area that should not be neglected. in the coming years all large banks will have to raise a significant amount of “ bail - inable ” liabilities in order to fulfil the new global and european regulation on total loss - absorbing capacity ( tlac ) and the minimum requirement for own funds and eligible liabilities ( mrel ). raising funds may indeed pose a difficult challenge. regulators and supervisors have to strike the right balance between the need to set appropriate criteria in order to stop taxpayers bearing the cost of future banking crises, on the one hand, and, on the other hand, the need to be sufficiently rigorous, with the risk, in persistently adverse market conditions for many intermediaries, of ultimately increasing the probability of future banking crises. the principle of bailing - in creditors makes sense but its concrete application requires care, especially in the current circumstances. the management of banking crises. italy ’ s experience has revealed serious drawbacks in the new european regulation governing small - and medium - size intermediaries which, under the new rules, cannot access the facilities embedded in the so - called “ resolution ” procedure. for these banks – the vast majority of the roughly 3, 000 euro - area institutions – a piecemeal liquidation is the only option currently available in the absence of interested buyers. but liquidation threatens the continuity of the supply of financial services, may imply large losses for both creditors and debtors and, due to potential contagion effects, may pose serious risks to overall financial stability. more must be done in this field, and from this perspective the experience of the united states is especially important. the us federal deposit

; it took almost two years of negotiations between the eurosystem and the european csd community to achieve a mutually satisfactory contract for the use of the platform ’ s settlement services. the broad participation in the governance of t2s ensured that all parties were given a voice in the project ; the complex governance setup will be tested during the operational phase, when decisions will have to be taken swiftly and at times under stress. why t2s after target2? i imagine this topic will be addressed by the ecb president in his talk. for now, let me just briefly rehearse some of the efficiency gains that t2s will bring. first and foremost, lower fees. in fact, with t2s the cost of settling cross - border transactions in europe will be lowered, and more appreciably so with the gradual increase in settlement volumes as migration proceeds. second, t2s will greatly facilitate transfers of collateral, hence liquidity management. this has become a critical issue in recent years because of the increasing demand for collateral. finally, t2s will contribute significantly to making settlement more reliable thanks to its extremely robust business continuity solution, based on the model already developed for target2. the next important step will be accomplished at the end of august when the italian csd monte titoli and the italian banking community bring their securities transactions to t2s for bis central bankers ’ speeches settlement. the italian market will add operational complexity through a substantial number of transactions, averaging 100 billion euro a day and topping 200 billion on the days of issuance and redemption of government bonds. this requires paying the utmost attention to avoid even the minimal operational risk that may still be related to the many technical procedures of the platform. and this is the reason why italian banks are now still actively testing the interaction of their internal it procedures in the new environment. banca d ’ italia has the job of monitoring trials in the italian market to ensure successful migration. we participate in the testing both as central bank and as customer of monte titoli, focusing on the issuance of italian government bonds and the related financial services. banca d ’ italia also serves, jointly with consob, as the supervisor of monte titoli. however, the challenges are not all behind us yet. very substantial volumes are still to arrive, not only with monte titoli at the end of august but also with the major players in the second and third waves. we have to work hard for t2s to be a