ims stability is likely to be of second order importance to countries ’ own near - term interests. at a bare minimum, a “ shared understanding ” would be required among surplus and reserve issuing countries on the stability requirements of the system and on how their behaviour can undermine its stability. this understanding could be achieved either informally – at the g - 20 level, through the “ framework for strong, sustained and balanced growth ” – or in a more institutionalized context for international cooperation such as the imf. a concerted, non - coercive approach would be surely preferable to one based on “ penalties ” ( including a threshold on “ excess ” reserves or automatic taxes on persistent current account imbalances for reserve issuers ). this approach should contemplate : ( i ) for reserve accumulating countries, a move towards flexible exchange rates and a significant reduction of foreign exchange intervention, or the abandonment of their pegs to national currencies ; ( ii ) for reserve issuers, the adoption of a macroeconomic ( fiscal ) policy framework to sustain credibility of their currencies and the ims as a whole. more ambitiously, steps could be taken to strengthen the global reserve system by ( iii ) enhancing the role of the sdr. this said, both in the g - 20 and imf settings the question remains as to how to make countries accountable ex post for the implementation of these understandings. a more diversified allocation of reserves among existing ( or newly created ) assets could, in principle, reduce global and individual exposure to risks stemming from economic shocks and policies of a single country, and provide more stable stores of value by increasing reserve issuers ’ incentives to pursue sound policies. reserve diversification is a marketdriven process that is unlikely to evolve rapidly without active promotion of the official sector. in addition, in the absence of greater policy coordination between reserve issuers to manage their exchange rates within acceptable ranges, a multi - polar system ( with several reserve currencies operating as broad substitutes ) may entail greater exchange rate volatility, especially in the transition phase. thus, the diversification process should be managed in a smooth and transparent way, to avoid large swings unwarranted by economic conditions. the fund could ( i ) promote greater transparency and an only gradual adjustment in the currency composition of reserves, ( ii ) engage with potential major reserve issuers to help remove the obstacles to a broader use of their currencies, and ( iii ) assist

financing business initiatives. 4 these are reflected in the composition of their lending, with 66 per cent of the total going to firms, against 59 per cent for other banks. comparing the figures for the five largest banking groups headed by banche popolari with those for major the data are from the european association of co - operative banks, 2007. p. bongini and g. ferri, “ governance, diversification and performance. the case of italy ’ s banche popolari ”, paper presented at the conference corporate governance in financial institutions, organized by suerf and the central bank of cyprus, nicosia, 2007. g. ferri, g. michetti, c. pacioni and c. tondelli, “ banche popolari tra crescita e localismo ” in r. de bruyn and g. ferri ( eds. ), le banche popolari nel localismo dell ’ economia italiana, edicred, rome, 2005. and large banks of comparable size, the gap widens to 10 percentage points ( 65 against 55 per cent ). strong roots in local economies are a prerequisite for mitigating the difficulties of access to credit even in hard times like these. excluding bad debts and repos, lending to residents by banche popolari and other banks belonging to their groups grew by 6. 8 per cent in 2008, compared with 5. 6 per cent for the banking system as a whole. the growth in lending by the five largest banking groups headed by banche popolari was in line with that of the other major and large banks. by contrast, lending growth was much livelier for the smaller banche popolari ( 13. 9 per cent ), also by comparison with other banks of comparable size and with similar operational characteristics ( 7. 2 per cent ) including the mutual banks ( 10. 4 per cent ). the gap between the growth rates of large and small banche popolari is explained in part by the difference in the intensity of their relationship with firms and local communities, since this tends to weaken progressively the more banks grow, open up to the market and expand their range of operations. when there is a significant development of business relationships and areas of activity, including abroad, there can also be a weakening of the control exerted in the form of social pressure and in other ways by the local community ( customers and shareholders