changes are a second structural shift to which banks need to adjust. recent reforms have increased capital and liquidity buffers ; the new resolution and liquidation regime requires a large volume of liabilities with high loss absorption capacity. furthermore, banks must also comply with additional requirements, such as those on anti - money laundering and consumer protection. the new markets in financial instrument directive ( mifid2 ) will enhance consumer protection, but at the same time it will increase the burden of compliance. the benefits of these regulatory changes are clear : banks are safer than in the past. at the same time, achieving pre - crisis profitability levels has become extremely challenging. indeed, an industry with much lower risk levels should entail lower returns and cost of equity. to face these challenges banks need to take firm action to reduce costs and achieve efficiency gains. 18 massive investments in information technologies and in human capital are necessary. progress is ongoing on this front. 19 against this background, a key avenue to improve efficiency and profitability is bank consolidation. indeed, some of the factors of change are having an impact on scale economies and the optimal bank size. setting up the technological infrastructure needed to do banking business today requires conspicuous investment ; in the face of negligible marginal costs, this is a factor increasing scale economies. fixed compliance costs have also risen considerably in recent years, due to stricter and more pervasive regulation. in countries where a widespread adoption of new technologies has been coupled with large it investments by banks, intermediaries tend to exhibit a higher roe than elsewhere, sustained by a low cost - income ratio. italian banks are reducing their branch network and are increasingly relying on digital resources. the number of branches at the end of 2017 was 20 per cent lower than in 2008. ambitious programs of staff reduction and internal restructuring have been announced ( and in many cases are being implemented ) by all the largest banking groups. past experience suggests that mergers and acquisitions, if properly designed and based on sound industrial projects, can yield material efficiency gains. 20 many italian banks can obtain remarkable benefits from consolidation. they must explore this possibility in order to obtain the efficiency gains, the technological skills, the product and geographical diversification that are necessary to compete successfully in the domestic and international market and to finance the real economy. 3. 3 firms ’ financial structure the last issue i wish to address is firms ’ financial structure. the regulatory changes introduced in the aftermath of the global financial crisis are inducing banks in many countries to deleverage

. this brings me to another risk that needs to be addressed : greenwashing. this requires a detailed and shared definition of global and european standards, which we are focusing on and working towards. public debt as i mentioned earlier, italian households entrust a not insignificant share of their wealth to the state by buying public debt securities. like any good debtor, a sovereign issuer also has a duty to make good use of this money and to return it as and when agreed. however, unlike private borrowers, a government must not only repay its loans. the protection and efficient use of consumer savings require economic policies that ensure balanced financial conditions, smooth out cyclical fluctuations in the economy and improve its growth potential. for highly indebted countries, reducing the debt - to - gdp ratio is a priority : excessive debt relative to growth potential reduces the scope for countercyclical policies, exposes the economy to market stress and raises costs for the government, and ultimately for households and firms. in 2022, the debt - to - gdp ratio in italy was 141. 7 per cent, the highest in the european union after greece, although we cannot overlook the significant reduction following a sharp increase during the pandemic : almost 15 of the more than 20 points of increase recorded in 2020 – over half of which due to the mechanical effect of the denominator – will have been absorbed by the end of 2023. however, the government only expects a marginal decline over the next three years, with debt projected to amount to just under 140 per cent of gdp in 2026. subsequently, if no action is taken, the ratio risks increasing. looking ahead, the average cost of debt is set to return to higher levels than the economy ’ s nominal growth rate and the impact of population ageing on social spending will become more significant. in the 20 years preceding the pandemic, the gap between the average cost of debt and the growth rate was constantly unfavourable, averaging almost two percentage points. the deep recession that hit italy in 2020 led to it reaching a value close to ten points. on the other hand, the subsequent two years saw exceptionally favourable values for this indicator, as a result of the post - pandemic recovery and, in part, of the strong growth in the gdp deflator : nominal gdp growth was on average more than five percentage points higher than the average cost of debt per year. according to the update to the economic and financial document published at the