ignazio visco : creating job, eradicating poverty and achieving sustainable prosperity statement by mr ignazio visco, governor of the bank of italy, on behalf of the constituency representing albania, greece, italy, malta, portugal, san marino and timor - leste, to the development committee, tokyo, 13 october 2012. * 1. * * creating jobs for development : a challenge for all countries according to the ilo ’ s latest estimates for 2012, the global number of unemployed is 200 million, about 30 million more than in 2007. at the same time, the share of the working age population with a job declined to an estimated 60. 3 per cent in 2012 from 61. 2 per cent in 2007. this scenario is projected to remain mostly unchanged in the coming years and can even turn out to be optimistic should some of the downward risks materialize. thus, the world development report ( wdr ) 2013 on jobs recently published and its companion paper “ creating jobs for development : policy directions from the 2013 world development report on jobs ” are timely in addressing one of the most pressing problems for many policy makers around the world. they also offer an opportunity to refocus the attention of the bank on its original mandate of eradicating poverty and boosting prosperity. jobs and especially good jobs, are the main avenue to achieve both goals. as the wdr 2013 states, it is for the private sector to create economically and socially sustainable jobs, and for the government to provide a stable macroeconomic environment, an investment friendly business climate, a solid rule of law and a balanced labor market regulation. policies and interventions will need to be tailored to each country ’ s initial conditions, based on the diagnosis of the constraints to job creation. 2. the knowledge bank : implications for the business model the strategy that aims at eradicating absolute poverty in poor countries and achieving sustainable and inclusive prosperity in middle income countries deserves support. financial resources need to be directed with priority towards countries that do not have access to the market at a reasonable cost. on the contrary, about 50 per cent of the overall ibrd exposure is currently to countries with per capita income above 2, 900 us dollars, and 30 per cent is to countries that can borrow from the market at a spread of no more than 150 basis points over the corresponding us treasury. redirecting financial resources to the least developed countries cannot imply that the wbg ceases to serve middle income countries. the wbg needs to define a

the eba consultation paper. i am arguing that the bsa needs to take this and other sources of heterogeneity into account. similar considerations apply to leverage. italian banks have lower leverage than their international competitors, partly because of their relatively small volume of business in derivatives. arguably, their operational risks are also comparatively low : italian banks have not been involved in any of the serious episodes of malpractice or the market - rigging schemes that have damaged the reputation and of some foreign intermediaries and cost them expensive legal settlements. these and other sources of heterogeneity, which tend to bias international comparisons against italian banks, have been documented by the bank of italy in its financial stability report as well as by market analysis. they will have to be duly taken into account in the comprehensive assessment. these arguments are intended simply to support a fair approach to the forthcoming bsa ; they are not meant to downplay the risks that the italian banking system faces. while italian banks have demonstrated good resilience overall, thanks to their sound fundamentals at the outset of the financial crisis, the sovereign crisis and two long and deep recessions have put their balance sheets under severe stress. npls have been rising steadily since 2008, depressing profitability and raising concerns over provisioning among analysts and market operators. and even though i have set out the reasons why we need to quickly enhance comparability among european banks, we take these concerns seriously. indeed, we have taken decisive action to address these risks, and we are confident that this will improve the outlook for the italian credit market. apart from episodes of malfeasance, which are relevant but circumscribed, serious difficulties mainly concern a handful of medium - sized and small banking groups. this class of banks has been particularly hard - hit by the recession, owing among other things to lesser diversification of risks and revenues. additional challenges have sometimes been raised by weak ownership and corporate governance structures, which may complicate capital strengthening and adaptation of business models. intense supervisory actions have been bis central bankers ’ speeches – and continue to be – taken on these banks. in some instances special administration has been necessary to allow a clear recovery and return rapidly to ordinary management. the bank of italy regularly reviews banks ’ asset quality as part of its standard supervisory activity, assessing the risk exposure of each institution. the quality of banks ’ assets is assessed continuously off - site, on the basis of detailed monthly supervisory reports.