growth to around 1. 5 per cent ( the average annual level recorded in the ten years leading up to the global financial crisis ) will require an average increase in labour productivity of a little under 1 percentage point per year ( figure 9 ). this objective calls for a sharp rise in tangible and intangible capital investment, and for productive efficiency gains comparable to those observed in the other main european countries. in any event, its achievement presupposes a break from the recent past ; it calls for the resolution of those structural problems, which for too long now we have failed to address, and which have become increasingly pressing in a new technological context and a more integrated world. last year, the ratio of investment to gdp was still three percentage points below what it was in 2007 : this year it will decline further ( figure 10 ). the lags with respect to the most advanced economies cannot be recouped by increasing public expenditure without first improving its efficacy and without making structural adjustments to the economy. while it will remain extraordinarily accommodative for a long time, monetary policy is no substitute for the measures needed to raise growth potential. resources must be channelled to where the social returns are highest ; to do so requires ongoing and substantial improvement in public services, with the necessary simplifications and the right distribution and mindful assumption of responsibilities. the technologies used and the quality and motivational levels of human resources have a profound impact on how administrations operate. we have learnt a lot from this crisis ; it has demonstrated the need to fast track the digitalization of working processes and to rethink their organization. the heavy turnover expected in public administration in the the governor ’ s concluding remarks annual report 2019 banca d ’ italia coming years will make it possible to hire young, highly - skilled and motivated workers from a variety of backgrounds ; we must support and invest in them. the accumulated lag in infrastructure must be overcome, as regards both traditional infrastructure, which must be upgraded and made more efficient, and highly innovative infrastructure, such as the telecommunication networks, which are necessary to support the technological transformation of the italian economy. the fixed broadband network reaches less than one fourth of households, compared with 60 per cent on average in europe, and the south of the country is especially penalized. the european commission ranks italy nineteenth among the eu states for connectivity. as has been underlined for too many years now, the quality of human capital must be improved, by tackling the

##4, characterised by robust capital adequacy, low levels of non - performing assets, and healthy profitability of banks and nbfcs. i would like to compliment the banks and other financial sector entities for such a stellar performance. there is, however, no room for complacency. we must keep constant vigil and continue to take proactive measures to sustain this progress. in today's environment which is characterised by turbulent global spillovers and uncertainties, it is important for the financial sector to follow an adaptive and forwardlooking approach to navigate amidst the emerging challenges. this would entail strengthening governance and risk management practices ; employing sustainable business models ; and embracing technological advances and using them to our advantage. on its part, the reserve bank will continue to fine tune the regulatory architecture and the supervisory rigour, as may be required, to promote long term resilience and stability of the financial system. let me now elaborate on each of these aspects. governance strong governance is at the core of resilience, especially in the financial sector. it is in fact the bedrock for informed and strategic decisions that align with long - term goals and risk management principles. in this context, i would like to highlight three major imperatives. first, effective governance entails establishing clear roles and responsibilities for the board of directors and the executive management. both of them should possess necessary expertise and independence to take the right decisions and to effectively exercise appropriate oversight on operations. second, robust governance also involves implementing comprehensive internal controls and strong assurance functions, namely, risk management, internal audit and compliance. internal controls should be designed to detect and mitigate potential risks before they escalate into significant issues. regular internal and external audits play a critical role in this process as they provide independent assessments of the organisation's financial health. they also facilitate genuine compliance with regulatory requirements. perfunctory compliance with regulations would actually be self - defeating. i am happy to note that at the systemic level, there has been significant improvement in compliance culture in our financial system. the reserve bank is bilaterally engaged with the outlier entities wherever it notices deficiencies. the heads of risk management, internal audit and compliance functions are the conscience keepers of a financial institution. they should have the necessary seniority and independence within the organisation. these verticals in a bank or nbfc play a critical role in identifying the gaps and weaknesses, if any, in their organisations and help in managing risks and safeguard