and to reduce their appetite for risk. in economies like the italian one, where firms – by international comparison – are relatively small and heavily reliant on bank credit, the consequences of such reforms for the financing of the real economy must be analyzed carefully. in order to mitigate possible unintended consequences, the development of a more diversified financial system is a priority for the italian economy. in recent years the italian authorities have introduced tax incentives and administrative simplifications to reduce the overall cost of ipos, to incentivize bond issues and to stimulate investment in innovative startups. the legislation on ace ( allowance for corporate equity ) is helping to improve firms ’ capitalization levels. the adoption of consolidated international contractual practice has prompted the entry of foreign specialized operators in the private debt placement market. cooperation between the public and private sectors has stimulated the creation of venture capital funds. 21 to encourage the demand for financial instruments issued by italian companies, the 2017 budget law has introduced tax exemptions for long - term individual savings plans ( piani individuali di risparmio, pir ). these measures have produced encouraging results. since 2011 the share of bonds among firms ’ total financial liabilities has almost doubled, to 12. 6 per cent last september ( from €90 in italy, between mid - 1995 and the mid - 2000s, mergers and acquisitions triggered a restructuring process that allowed the banking industry to absorb excess capacity. in connection with the far - reaching consolidation that took place, between 1995 and 2004 large productivity gains were achieved : total assets and value added per employee grew respectively by 4. 6 and 2. 4 per cent per year at constant prices see focarelli, panetta and salleo ( 2002 ) “ why do banks merge ” journal of money, credit, and banking, v. 34, and focarelli and panetta ( 2003 ) “ are mergers beneficial to consumers? evidence from the market for bank deposits ” american economic review, v. 93, 4. thanks to a public - private partnership, the fondo italiano di investimento between 2012 and 2016 created two venture capital funds of funds that invested €100 million in venture capital private funds ; the size of the italian funds involved in these transactions is equal to €400 million. billion to more than €150 billion in absolute terms ). the number of firms issuing bonds is increasing ; moreover, while in the past only large industrial groups were active in the market, now recourse to bonds

trends ’, bank of italy occasional papers, 401, http : / / www. bancaditalia. it / pubblicazioni / qef / 2017 - 0401 / index. html. the duration of insolvency procedures ranges from 4. 8 years in the most virtuous districts to 10 years in the less efficient ones. the duration of real - estate foreclosures ranges from 2 to 8 years. recovery procedures. until then, the implementation of these mechanisms will need close monitoring. i argued above that de - risking is a key factor for banks to contain the cost of funding and to attract fresh capital. some commentators link de - risking to the creation of a european deposit insurance scheme ( edis ), the missing pillar of the banking union, arguing that regulators should tighten prudential rules on sovereign exposures to break the link between banks and the sovereign. 14 this proposal does not fully consider the fact that the microeconomic and macroeconomic costs of such a prudential reform could be sizeable, while the benefits are uncertain. the bank - sovereign nexus, in fact, goes well beyond simple direct credit exposures, and depends above all on the impact that both banks and sovereigns have on the real economy. furthermore, in some circumstances increasing banks ’ sovereign exposures may actually play a stabilizing role. 15 these considerations, shared by most global supervisors, recently led the basel committee to leave unchanged the prudential treatment of sovereign assets. the problem of high public debt should be addressed by governments directly, with determination. it should not be improperly tackled with prudential regulation. more generally, while it may make sense to start from a clean slate before going forward with edis, blind spots should be avoided. while npls or sovereign bonds may represent a source of risk for some banks, for others – such as large intermediaries engaged in investment banking – risks take the form of a high incidence of complex financial instruments, those classified for accounting purposes as level 2 and level 3. these are, to a large extent, assets and liabilities not directly traded in active markets or marked to model, whose value is difficult to assess. at the end of 2016 there were about €3. 6 trillion of these instruments on the assets side and €3. 2 trillion on the liabilities side of the balance sheets of euro - area significant institutions. the total is €6. 8 trillion, about 12 times that of net npls