are limited. at the end of 2004 household debt was equal to 28 per cent of gdp in italy, compared with a euro - area average of 55 per cent and about 90 per cent in the united states and the united kingdom. partly as a consequence of subdued investment, the financial conditions of firms have remained good on the whole. in 2004 firms ’ operating profits were higher in relation to value added than during the cyclical downturn of the early 1990s. however, the data for the sample of around 40, 000 non - financial corporations surveyed by the company accounts data service show a fall in profits in the period 2000 - 03, notably in the textile, clothing and transport equipment sectors. firms ’ interest expense has diminished thanks to the reduction in interest rates, due in part to the lengthening of the average maturity of corporate debt. leverage is seven percentage points below the level of the 1990s ; the average maturity of italian firms ’ bank debt is gradually approaching that prevailing in the other european countries. there continues to be rapid growth in financing to categories of firms that in the past encountered greater obstacles in gaining access to credit during cyclical downturns ; credit to firms resident in the south of italy increased by 8. 5 per cent, two points more than the national average. in the period 1996 - 2004 the value of mergers and acquisitions between banks in italy accounted for 27 per cent of the euro - area total, compared with the italian banking system ’ s roughly 14 per cent share of euro - area bank assets. the far - reaching transformation of the banking system since the middle of the 1990s has had positive effects on operations. since 2001 loan quality has remained unchanged despite the weakness of the economy. at about 1 per cent the ratio of new bad debts to outstanding loans is very low by comparison with the past. households and firms have benefited from part of the banking system ’ s efficiency gains through more favourable rates on deposits and loans. in 2004 banks ’ profits amounted to €11 billion, or 10. 7 per cent of capital and reserves, compared with 6. 7 per cent in 2003. contributing to the improvement in the results for the year were the decline in value adjustments to loans and a significant increase in net non - recurring income. operating costs diminished by 0. 5 per cent with respect to 2003. the ratio between costs and revenues was in line with the european average. the growth in self - financing and capital increases have strengthened the banking system ’ s capital base. at the end of 2004 italian banks

all have risen to the level of that sixth - grade class. we need to exert especial effort to improve the skills and earning power of those who appear to be falling behind. the federal reserve has a keen interest in promoting financial education and increasing the visibility of resources for consumers. in may, the federal reserve launched a national campaign to highlight the importance of personal financial education and money management to achieving short - and longterm goals such as pursuing higher education, purchasing a home, or starting a business. this initiative includes a public service announcement, a printed brochure, and a dedicated web site that identifies resources for learning more about financial management products and services. the federal reserve also has a long - standing interest in increasing minority access to credit markets. we study access to mortgage and small business credit for underserved populations and have participated in a pilot program teaching mortgage finance at select community colleges. this innovative program, targeted to minority students in underserved communities, trains individuals for a broad array of career opportunities in mortgage lending. we also are interested in measuring the effectiveness of financial education programs. studies evaluating such programs were presented at the federal reserve system's 2003 community affairs research conference. in addition, the federal reserve and the department of defense are collaborating on a study of the efficacy of personal financial management education provided to members of the military services and their families. this research will provide insights into what financial education interventions prove most effective with specific audiences and will provide valuable guidance for teachers, employers, and other financial education providers and funders. building bridges between community organizations, educational institutions, and private businesses is essential to increasing familiarity with new technological and financial tools. and the success of such efforts will bear significantly on how well prepared our society is to meet the challenges of an increasingly knowledge - based economy. in closing, let us remember that education is the primary means for creating new economic and financial opportunity for everyone. if we are able to boost our investment in people, ideas, and processes, just as we do in machines and technology, consumers and the economy can readily adapt to change, providing ever - rising standards of living for all americans.