of a bank's assets and liabilities exposes it to interest - rate risk, since an increase in prevailing rates will cause short - term funding costs to increase without a concomitant increase in interest income from long - dated, fixed - rate loans. under normal conditions, this risk can also be managed relatively easily, for example by hedging interest - rate changes using derivative instruments. unanticipated systemwide shocks to the demand for liquidity, however, are far more difficult to deal with. during times of systemwide stress, such as the one we are now in, significant liquidity demands can come from both the asset and the liability side of a bank's balance sheet. on the liability side, banks can face challenges in refinancing short - term debt in the money markets. on the asset side, off - balance - sheet exposures can unexpectedly come onto a bank's balance sheet. for example, we have recently seen how draws on liquidity commitments to structured investment vehicles, commercial paper conduits, and others can lead to significant growth in bank assets. banks can also encounter problems dealing with unplanned growth in on - balance - sheet assets when market liquidity dries up. for example, they may have difficulty selling whole loans, syndicating leveraged loans that they have previously committed to make, or securitizing assets, such as non - conforming mortgages, as planned. during times of severe stress different types of liquidity shocks may become correlated. therefore, when there is a marketwide scramble for liquidity, a bank must be prepared to manage funding challenges and unplanned asset expansions simultaneously. banks should be prepared to deal with unanticipated and correlated liquidity shocks, both for their own sakes and for the sake of the broader financial system. in other words, it is critical to have funding sources in place if such liquidity shocks occur. in some cases, an increase in deposits can provide a partial funding source. in the face of significant economic uncertainty, historical data suggest that many savers may prefer to shift their assets to relatively safe bank deposits at the same time that cash - strapped businesses and a variety of investment vehicles need to draw down credit lines. thus, because banks can both create demand deposits and provide lines of credit, they act as shock absorbers during times of turbulence, douglas w. diamond and philip h. dybvig ( 1983

peace and prosperity in a fragmented world speech by fabio panetta * governor of banca d ’ italia economy and peace : a possible alliance fondazione centesimus annus pro pontifice bologna, centro san domenico, 16 january 2025 today, our world is facing an alarming rise in geopolitical tensions and conflicts. the number of wars, which had decreased after the fall of the berlin wall, has turned upward again in the last fifteen years ; in 2023 it reached its highest level since world war ii ( figure 1 ). in many regions, war – often fratricidal – is a daily reality. 1 day after day, the news brings us dramatic images, reawakening fears linked to the traumatic experiences of the two world wars. in western europe, the debate about significantly increasing defence spending has resurfaced after a long time. but conflicts are not the only cause for concern. the denial of basic needs, which still affects large parts of the world's population, is also a form of violence. after decades of ever stronger international cooperation and economic integration, history now seems to be taking a step backwards. it is a very different world from the days when i started working as a central banker. in many ways, it is a world of greater uncertainty and less hope for the future, although even back then there was no shortage of stark clashes and dramatic tensions. 2 * i would like to thank andrea brandolini, patrizio pagano, roberto piazza, pietro rizza and girolamo rossi for their help in writing this speech, and valentina memoli and roberto pisano for their editorial support. most of the ongoing armed conflicts are civil wars. those in myanmar, sudan and ethiopia are among the bloodiest ( source : acled ). the war in sudan is causing a devastating humanitarian crisis : some 25 million sudanese are suffering from food shortages ; 10 million have fled their homes and 2 million have sought refuge abroad. in the 1980s, despite signs of progress and hope – such as the possible rapprochement between the superpowers – there were still geopolitical, social and economic tensions. the cold war shaped world politics, fuelling fears of an imminent nuclear conflict. in the middle east, the iran - iraq war and the conflict in afghanistan, with the soviet invasion, strained international relations. apartheid in south africa was a further sign of the persistence of racial segregation dividing societies around the world. in poland, the solidarity movement