costs of government securities. increases in long - term interest rates would impact on the real economy, with possible repercussions on banks ’ balance sheets, casting doubt on the strengthening of the financial system. rules and controls on finance the purpose of the package of regulatory proposals recently announced by the basel committee on banking supervision is to strengthen banks ’ stability and contain liquidity risk. banks ’ capital bases will have to consist of high - quality instruments, genuinely capable of absorbing losses ; leverage will be curtailed ; the procyclical aspects of regulation will be attenuated through the build - up of capital buffers and provisioning in periods of strong growth for use when losses materialize. in the early part of this year, the committee will conduct a detailed impact assessment, in order to appraise alternative proposals, calibrate the new rules and set the new, higher capital requirements for banks. it will be important to verify the overall consistency of the framework, imposing stricter prudential requirements on those banks that operated with the particularly risky business models that were at the root of the crisis. the g20 leaders decided that the new rules do not have to take effect immediately, but only at the end of 2012, and in any event under the proviso that they not impair the stability of the markets and the resumption of an adequate flow of funds to the economy. they called on the financial stability board to examine the macroeconomic implications of the reform, and to ensure the requisite gradualness of its implementation, with appropriate transitional and grandfathering clauses governing the instruments already issued. the crisis demonstrated the devastating repercussions of the failures of major financial institutions. governments and central banks intervened to mitigate its impact ; in so doing, at times they supported and protected the very institutions that had triggered the crisis in the first place. moral hazard was compounded by the crisis : financial institutions have felt sheltered from the risk of failure and the fear this inspires, they have been taking new risks and, thanks to the extraordinary market conditions that have been created, are reaping enormous profits. reducing moral hazard is a shared objective. this is to be done by lessening the likelihood of failures and circumscribing the attendant damage ; creating mechanisms for their orderly management ; and centralizing the channels that transmit their effects, such as derivative instruments, which nowadays are traded outside regulated markets and bilaterally. criteria must be devised to determine the systemic importance of an

to the decisions of central banks, which react to macroeconomic conditions, but rather reflects the enduring underlying weakness of the economy and a possible market response to a resurgence of fisherian debt deflation. we are still quite far from the “ normal ” economic conditions to which we ought to return ( also in view of the structural factors that could explain lower growth rates worldwide than in recent decades ). the introduction of a two - tier system for bank reserve remuneration – which was also adopted in other jurisdictions – is intended to prevent the reduction in official rates to negative values from having, beyond a certain level, the undesirable side effect of impairing banks ’ ability to grant credit and, therefore, from being transformed into a restrictive factor. nevertheless, encouraging greater trading between banks seeking higher returns on their liquidity may spark tensions on money market rates, a risk that is countered by the calibration chosen but one which must still be carefully monitored. in its forward guidance, the governing council confirmed its determination to respond symmetrically to inflation developments, in other words to intervene when inflation falls below the target with the same determination as when it rises above it. the aim is to avoid a further downward revision of inflation expectations, or the resurfacing of the deflation risks we successfully countered three years ago, whilst simultaneously guaranteeing financial conditions capable of supporting the economic cycle. monetary policy resolutely pursues the objective of price stability. to achieve the maximum benefits from our action, the governing council unanimously agrees that, given the slowdown in production and the significant downside risks that weigh on the outlook, fiscal policy must make a more incisive contribution to strengthening aggregate demand. during this phase, the countries that have room to intervene can play an important stabilizing role ; those with a high public debt must prioritize a rebalancing of expenditure towards measures that are better able to support growth, such as public investment, and to reduce the tax burden on businesses and employment. * * * in conclusion, i think that the package of measures we adopted was necessary and appropriate to counter the cyclical risks and the weak inflation outlook, and fully in line with our previous decisions. in the past, i have always avoided giving my opinion of monetary policy decisions immediately after governing council meetings. i have decided to do so today, a few weeks after the last decisions were taken, mainly because of the recent media attention given to the discussion that followed that meeting. intense and