in the event of an emergency. coordination between the different countries ’ authorities and convergence of supervisory practice reduce the cost of supervision over international banks, helping to foster the integration of the european market in banking services. this is another reason for speeding up coordination. at the same time community directives are progressively harmonizing the regulation of financial markets and products and consumer protection. but there remain significant differences in corporate, commercial and bankruptcy law. action by european and national legislators is indispensable to strengthen the single market and simplify crisis response. the restructuring of the banking system our system took full advantage of the opportunity presented by the favourable financial situation of the past years to conceive and carry out major banking mergers, which would be much harder to effect in today ’ s market conditions. the end - product must be a system that is sounder, more efficient, with a wider range of higher - quality services, and in which banking intermediation is less costly for the economy. swift execution of planned mergers and continuous verification of the results are essential, especially in the current market situation. above all, the rapid integration of information systems is a prerequisite not only for efficiency gains but also for risk control, which is increasingly necessary with the growing complexity of business operations and expansion into new markets. it is still early for a full assessment of the impact of mergers on banks and customers. the data available show that at 31 march this year the economic results of the four main groups involved in mergers were substantially in line with their business plans. these indicate, however, that the greater part of the benefits of the mergers carried out in 2007 – estimated at €3. 9 billion a year when fully achieved – will not be realized until subsequent years. the extraordinary costs of the mergers, consisting largely of severance benefits for redundant personnel, came to €3. 3 billion and were mostly charged to the accounts for 2006 and 2007. in order for customers to benefit from mergers and acquisitions, it is important that the increase in concentration not weaken competitive pressures. in the 1990s, a period marked by intense and growing competition but also by many mergers, the resulting efficiency gains were passed on to customers, albeit with a lag. in the end the banks involved in the concentrations offered their customers more favourable terms both on deposits and on loans. the network economies stemming from mergers enable banks to extend their distribution channels, with a reduction in charges for some kinds of transaction, such as cash withdrawals, and to broaden and

import put forward by international institutions such as the european economic community or the international monetary fund. as one of baffi ’ s leading collaborators has recalled, he invited the bank ’ s legal experts to delve into every legal nook and cranny in search of the desired precept. 5 the absence of a well - defined institutional framework made it necessary to adopt complicated logical exercises to argue in favour of the defence of the currency : for baffi the principle of “ no taxation without representation ”, violated by inflation insofar as it causes arbitrary redistribution, was the one to call upon to give the central bank the task of defending the currency. in this “ campaign of persuasion ” baffi frequently discussed monetary policy choices in the press. he believed that announcing monetary objectives was a factor of transparency that would have durably altered central banks ’ modus operandi. as he was to say later, “ the actions of central banks are no longer cloaked in silence, and perhaps never will be again. whereas in the past silence was seen as a guarantee of independence, today this is achieved by giving an explicit account of one ’ s actions ”. 6 m. sarcinelli, “ governor baffi ’ s monetary policy ”, banca nazionale del lavoro, quarterly review, no. 179, december 1991, pp. 513 - 35. banca d ’ italia, annual report for 1978, p. 158. baffi was strongly opposed to the tangle of credit and foreign exchange administrative controls through which monetary policy was conducted. he found it profoundly unsatisfactory “ in having to direct central bank action in such a way that it suffocates a system that possesses its own valid parameters and mechanisms ; in having to constrain the volume of credit potentially expressed by the flow of monetary base because it is not possible to regulate that flow ; in having to channel the flow of credit ”. he was convinced that the costs of the distortions produced by administrative controls were substantial and lasting and that the monetary effects were ephemeral : in the long run the aggregates are brought “ back into line with basic economic conditions ”. monetary management and the ems negotiations baffi did not win the battle against the straitjacket that had been imposed on the market. the emergencies he had to tackle, the exceptionally difficult situation he faced with regard to taxes and wages forced him to continue to use the administrative constraints put in place by his predecessor in earlier years. monetary policy