actually functions, nobody believes them literally. “ utility ” for instance, ( sane ) economists will accept, has no well - defined physical counterpart. this means that, while recognising the usefulness of this or that formal model in many cases, one should remain alert to its limits. consumer behaviour is a case in point. utility maximisation by consumers has proved to be a fantastic tool for developing compact, elegant models to describe many interesting and crucial features of the real economy. yet it cannot provide all the answers, especially when you look at consumers ’ choices in a concrete environment and reflect upon the best ways to regulate market conduct in legal detail. converting a useful simplifying modelling device into an article of faith about how the human mind works would be nonsense. one does not need to throw away a century of economic thought to recognise that human behaviour is much subtler and more elusive than that ; one needs only some reasonable human heuristics, as it were, and the ability to adapt one ’ s tools to the task at hand. nevertheless, it took a while for economists to recognise in full that actual consumer decision - making is rather different from what is expected from a rational agent who single - mindedly maximises a utility function – a major exception being the studies on bounded rationality. 2 by contrast, marketing experts developed an understanding early on of how buyers actually make decisions, and found ways to profit from it. regulators that fail to recognise this asymmetry, and act upon it, would not do a good job. this is not a theoretical point, and the audience today will need no convincing. there is even a plausible claim that the delay in tackling certain financial consumer protection issues contributed to the financial crisis ten years ago. 3 be that as it may, the day - to - day task of ensuring the fair and efficient functioning of the market for consumer finance requires a richer model of consumer behaviour than one based on “ utility ” maximisation and the full use of information. hence, the increasing attention now devoted to behavioural economics by financial regulators and supervisors, with the aim of designing and implementing policies that help consumers take financial decisions they will not regret. this seminar will benefit from contributions from the academy and from supervisors. the bank of italy strongly supports this interaction. before leaving the floor to our speakers, let me briefly recall some well - known insights from behavioural economics that have been significant in the evolution of regulation in the field of financial consumer protection, and provide

design of new products, consumer - testing activities, as well as distribution ; iii ) sound remuneration policies for sales staff, to mitigate the risk of perverse incentives for misleading the consumer. as regards supervision, since the establishment of a dedicated directorate in 2014, the bank of italy has been moving steadily from the assumption that more information is always better to a focus on salience as opposed to sheer quantity ; from mere disclosure to a broader range of issues ( including governance and strategy ) ; and from a box - ticking approach to an approach that includes cooperation and guidance. we have thus complemented our supervisory action by issuing guidelines to clarify supervisory expectations. this approach has proved to be fruitful in addressing issues that are highly significant for consumer protection, such as the remuneration of overdrafts and overrunning, the unilateral variation of contracts, the handling of complaints, and the conditions for consumer credit. for enforcement, we start from the assumption that customers harmed by unfair business conduct and non - compliance with regulatory requirements should be in a position to seek redress in a way that is simple, fast, and inexpensive. to this end, in 2009, the bank of italy established an alternative dispute resolution mechanism for the banking sector ( the arbitro bancario finanziario or abf ), which has proved to be effective, has become increasingly popular with customers, and has somehow become a benchmark for other regulated sectors. while the abf ’ s decisions are not binding, “ naming and shaming ” is applicable in the event of non - compliance and has proven an effective deterrent. furthermore, as financial services providers are required to take the abf ’ s decisions into account when dealing with complaints from their customers, this enforcement system contributes to increasing the overall fairness of contractual relationships in the banking sector. finally, a few remarks on financial education. while regulation and supervision may help to address indirectly some of the major flaws in consumers ’ choices, there is broad consensus that the empowerment of consumers also requires strategies aimed at increasing their basic financial knowledge. nowadays people are probably facing increasingly complex financial decisions more often than at any other point in humankind ’ s history. ageing and the evolution of welfare imply an enhanced role for life insurance and private pension schemes. the increased range of financial investment choices provides better potential opportunities, but may appear baffling to non - experts. technological development in payments are transforming, beyond recognition, the way we conduct even the most