was overcome, inflation was tamed, the public finances were brought under control. this is clearly another story, one that took a benign turn thanks also to the many infrastructural changes that had made it possible for monetary policy to play its proper role within a transparent and well - organised financial architecture. it is natural, today, to take it for granted that a transparent and well - organised financial architecture necessarily includes a smooth, well - functioning and economical payment system for clearing and settlement. but this is a relatively recent achievement, one that has benefited greatly from the information and communication technology revolution. in the mid - 1980s the payment system, and not only in italy, was rather neglected and far from well - organised. tommaso was convinced that central banks ’ tasks should comprise not only money creation franco modigliani and tommaso padoa - schioppa, “ la politica economica in una economia con salari indicizzati al 100 % o piu ”, in moneta e credito, no. 117, march 1977, and “ the management of an open economy with ‘ 100 % plus ’ wage indexation ”, in essays in international finance, princeton university, no. 130, december 1979. bis central bankers ’ speeches and inflation targeting but also improving the mechanisms of monetary circulation, instituting reliable and efficient infrastructures, and what is now called “ transaction banking ”. in a market economy the costs of a dysfunctional payment system could be just as great as those deriving from volatile inflation rates. this was particularly evident in italy, where at the time the settlement of cheques or the completion of a credit transfer were long and cumbersome processes that involved a fragmented set of bilateral arrangements among banks. the reforms that tommaso padoa - schioppa promoted at the end of that decade successfully bridged the gap between italy ’ s system and that in place in the other major economies. in a first phase, from 1989 to 1993, the reform involved the system for netting in central bank money, with the launch of dedicated projects for various payment types ( customer paper - based and electronic, inter - bank, foreign exchange, securities trading ). he then promoted a national, centralised real - time gross settlement system in central bank money that exploited the most advanced technologies and that would quickly make central banks the leaders in this sphere. eventually, the system was adapted to be fully integrated into the network of euro

that as “ policy and structure become inextricably combined, their joint product is what matters. … one way to alter the operating properties of the system … is to change the policy rule. another way is to change the structure ”. 10 and it was to changing structures that he devoted much of his intellectual and professional life. for several years, while still at the bank of italy, he was chairman of the basel committee, where he initiated a process that would lead to what came to be called the “ basel ii ” accord. the regulatory system was built around the basic notion that banks should set aside capital to guard against the various types of risk : credit, market, operational. the financial crisis has taught us that both the assessment of and the allowance for these risks were vastly inadequate. tommaso recognized this. still, he maintained that basel ii was definitely better than the previous accord precisely because it sought to specify in detail the various risks in banking and to provide, through its “ three pillars ” construction, a comprehensive framework to deal with them. he conceded that substantial changes at the technical level of the accord were necessary, but he emphasized, in his per jacobsson lecture last june, that “ what really went wrong is on the side of the government [ which ] was captured by the myth that finance can regulate itself spontaneously and hence retreated too much from the regulatory and see, on this, his book co - authored with michael emerson, mervin king, jean - claude milleron, jean paelink, lucas papademos, alfredo pastor and fritz scharf, efficiency, stability and equity. a strategy for the evolution of the economic system of the european community, oxford university press, london, 1987 see, “ the ems is not enough : the need for monetary union ”, 1987 ( chapter 6 of the road to monetary union, cit. ), and “ squaring the circle, or the conundrum of international monetary reform ”, in catalyst, a journal of policy debate, spring 1985. the road to monetary union, cit., p. 22. see, finally, the euro and its central bank. getting united after the union, mit press, cambridge, mass., 2004. james tobin, “ financial structure and monetary rules, in kredit und kapital, 2, 1983, quoted in “ reshaping monetary policy ”, cit. p. 283. bis central bankers ’ speeches supervisory role that is necessary to ensure