example, governor kroszner of the federal reserve board serves as a director of neighborworks america, a nonprofit organization that has been helping thousands of borrowers facing current or potential distress to obtain assistance from their lenders, their servicers, or trusted counselors through a hotline. the federal reserve board's staff has been working with consumer and community affairs groups throughout the federal reserve system to help identify localities that are most at risk of high foreclosures, with the intent to help local groups better focus their outreach efforts to borrowers. other contributions include foreclosure prevention programs, such as the home ownership preservation initiative, which the federal reserve bank of chicago helped to initiate, and efforts by reserve banks to convene workshops for stakeholders to develop community - based solutions to mortgage delinquencies in their areas. the federal reserve system is also engaged in research and analysis that should help inform policy responses to these issues. the congress is also focused on reducing homeowners'risk of foreclosure. one statutory change that could help is the modernization of programs administered by the federal housing administration ( fha ). the fha has considerable experience helping low - and moderate - income households obtain home financing, but it has lost market share in recent years, partly because borrowers have moved toward nontraditional products with moreflexible and quicker underwriting and processing and partly because of a cap on the maximum loan value that can be insured. in modernizing the fha, the congress might encourage joint efforts with the private sector that expedite the refinancing of subprime loans held by creditworthy borrowers facing resets. it might also consider granting the agency the flexibility to design products that improve affordability through such features as variable maturities or shared appreciation. also, the fha could provide more refinancing options for riskier households if it could tailor the premiums it charges for mortgage insurance to the risk profile of the borrower. as i have discussed in earlier testimony, the federal reserve is taking steps to avoid subprime lending problems from recurring while preserving responsible subprime lending. in coordination with other federal supervisory agencies and the conference of state banking supervisors ( csbs ), we have issued principles - based underwriting guidance on subprime mortgages to help ensure that borrowers obtain loans that they can afford to repay and have the opportunity to refinance without prepayment penalty for a reasonable period before the

, were, on average, well above the regulatory minimums and they have remained so. bank funding, more than 60 per cent of which is made up of deposits by resident customers ( and which grew significantly as a result of the pandemic ) has been more than sufficient to finance loans. market funding, while limited in volume terms, has continued to be available at very low interest rates. in the face of a dramatically worsened economic outlook, which suddenly heightened the risk of insolvency for firms, the banking system quickly increased its loan loss provisions, although with some differences between banks. profits in 2020 were inevitably affected, though capital ratios were not. dividend distribution was very prudent, mainly owing to the recommendations issued by the european systemic risk board, the single supervisory mechanism and the bank of italy, supported by granular supervisory action. public loan guarantees contributed to limiting riskweighted assets. at the end of june this year, the cet1 ratio was 15. 2 per cent on average, more than one percentage point higher than at the end of 2019. in the first half of 2021, banks ’ profits returned to growth, both because the cost of credit risk went down considerably, mainly thanks to the sizeable provisions made in 2020, and as a result of the positive trend in trading profits. average roe reached 8. 9 per cent on an annualised basis. 1 / 8 bis central bankers'speeches some improvements are probably transitory and, as a result, overall profitability in 2021 could be lower than in the first half of the year. the roe expected by financial analysts for the main italian banks stands at around 6 per cent, a similar level to that recorded in 2019. the gradual phasing out of the support measures, moratoriums and guarantees will surely bring to light cases of repayment difficulties. however, it is to be expected that the deterioration in credit quality will be much less marked than it was in previous crises. banks have started paying out dividends again since the supervisory authorities, having carefully assessed the improving economic outlook, withdrew the exceptional restrictions they had previously recommended. in any case, we expect the banks to preserve adequate capital in relation to risks ; it is essential that they continue to adopt a prudent approach to loan loss provisions. 2. the basel reforms the regulatory reforms introduced in recent years by the basel committee – known collectively as basel iii – contributed to the capacity of italian and international banks to tackle the crisis of 2020. these