mr fazio gives an address on the italian capital markets and the need for new strategies in euroland address given by mr antonio fazio, governor of the bank of italy, at the euromoney conference, held in rome on 23 november 1999. * * * between 1985 and 1998 the stock of public and private - sector bonds issued in the group of ten countries rose from 90 % to 130 % of their combined gdp ; the market value of listed shares rose from 30 % to 100 %. the use of derivatives grew even faster : between 1990 and 1997 the notional value of those traded in organized markets rose from 40 % to 200 % of gdp. the flow of loans granted to non - residents by banks of the countries reporting to the bank for international settlements amounted to $ 1, 100 billion in 1997, or 5 % of the reporting countriesa€™ gdp. the integration of financial markets, the prospects for growth in the emerging countries and the transformation of the economies in transition have created the conditions for an increase in allocative efficiency at the global level. the constraint imposed by the scarcity of financial resources for investment has been eased, especially in the developing countries. the growing dissociation between the generation and use of savings may nonetheless increase the riskiness of investments. strategies aimed at maximizing profits in the short run and herding have added to the volatility of prices. large - scale recourse to derivatives, which are extremely useful in controlling financial risks, has aggravated the adverse effects of speculative behaviour in some instances. the new context calls for careful assessment of the adequacy of national economic policies and the efficiency of the financial system, as well as careful control of borrowersa€™ creditworthiness and the use to which they actually put the resources they raise. in recent years intermediaries sometimes persisted in directing large volumes of resources towards countries with serious imbalances. this behaviour generated tensions and in the end led to crises. italya€™s financial system is increasingly integrated into the global economy ; the adoption of the single european currency has intensified the process of integration. the return to monetary stability has created macroeconomnic conditions conducive to the expansion of the securities market. the size gap with respect to the other leading industrial countries remains to be closed. bonds the reduction at the global level in the volume of savings absorbed by public debt issues has freed resources for productive investment and contributed to the decline in interest rates. in europe,

securities markets. equities the capitalization of the italian stock market rose from 18 % of gdp in 1994 to 50 % in 1999, as against 75 % in france and 56 % in germany. the gap compared with the united kingdom and the united states is very large. at the end of 1998 there were 223 listed companies in italy, the same number as in 1994. the composition of the official list has improved : many of the private - sector companies that have turned to the market are industrial firms and do not belong to groups that were already present on the stock exchange. in the same period the number of listed domestic companies rose from 423 to 740 in germany, from 489 to 754 in france, and from 2, 070 to 2, 399 in the united kingdom. the development of the italian stock market has been influenced by the large proportion of small firms and the still limited propensity of medium - sized and large companies to seek a listing. the rise in share prices since 1994 has been partly due to the fall in nominal and real interest rates. privatizations have accounted for the greater part of the contribution new listings have made to the marketa€™s growth. the success of the offerings of state - owned companiesa€™ equity on the market testifies to italian saversa€™ lively interest in equity investment. with domestic supply still limited, italian saversa€™ demand for shares has also given rise to substantial investment in foreign securities. in 1998 purchases of foreign shares amounted to around eloolrq in 1999 they have increased further, rising to around eloolrq lq wkh iluvw qlqh prqwkv savings pooled in investment funds contributed substantially to the outflow of capital. pension funds continue to be of limited importance in italy, whereas they play a pre - eminent role in the countries with more highly developed financial systems. their equity portfolios are equal to about one third of total market capitalization in the united states and the united kingdom. the growth of the stock market in italy over the last five years has benefited from legislative innovations and tax incentives. far - reaching measures have improved the organization of the market, considerably increasing the liquidity and transparency of trading. in 1998 the ratio of market turnover to capitalization was close to 100 %. the growth of derivative products contributed to the increase. last year the italian market in equity futures ranked second in europe in terms of trading volume. the use of derivatives has