securitisation and credit derivatives markets – created an environment where credit was cheaper and more readily available, but at the same time a situation where the structure of the credit system became more complex. moreover, the extended period of favourable economic conditions and market participants ’ perception of a rather benign outlook for financial markets and macroeconomic developments in more recent years may have served to create complacency and some under - pricing of risk. against this background, the recent turmoil appears closely related to the complex nature of certain securities which have been issued in significant amounts during the rapid expansion of asset securitisation. these involve instruments such as asset - backed securities ( abs ) and various so - called structured finance products, such as collateralised debt obligations ( cdo ). through such instruments, banks and so - called “ special vehicles ” associated with them have packaged loans with various credit qualities and sold them, structured into different risk classes, to investors based on their specific appetite for risk and return. in addition, banks have increasingly used so - called conduits and structured investment vehicles ( sivs ) to transfer a portion of their investments in structured products off their balance sheet. starting initially with the mortgage markets, these securitisation operations have been extended to many other types of credit. needless to say, such financial innovation has greatly increased the complexity – some would say opacity – of financial instruments, which serves to explain, at least in part, the current uncertainties that banks face about the quality of the product they have purchased and, by implication, the quality of their balance sheet and those of their counterparts. the current turmoil began in mid - june when investors became increasingly concerned about the state of the us mortgage markets, in particular the so - called sub - prime segment. growing concern among investors, reinforced by further negative news about the us real estate market, initially affected the capital markets rather than the money markets. however, tensions were soon to surface in the money market as problems emerged in the refinancing of us - dollar denominated investment programs in asset - backed securities. these programmes operated via the off - balance sheet conduits. such conduits typically invest in longer - term asset - backed securities or cdos ( some with exposures to us sub - prime mortgages ). these investments are refinanced on a revolving basis through short - term borrowing by means of the issuance of so - called asset - backed commercial paper ( abcp )

it is becoming increasingly important to monitor not only the performance of economies but also single sectors and investment projects. careful selection in the allocation of resources fosters the expansion of the global economy. italy is endowed with professional and entrepreneurial expertise, labour and savings allowing it to compete successfully with other economies in the new and more competitive european and global environment. the many small firms present in the italian economy can be a strong point, in view of their ability to use new technology and adapt rapidly to changes in external conditions. however, the increase in competition requires a major expansion in innovative sectors, something that larger companies are better able to achieve. the financial system can make a fundamental contribution by making finance available to the most viable investment projects, helping to keep domestic savings in italy and attracting resources from abroad. the restructuring of the credit system under way and the formation of major banking groups will support the activity of medium - sized and large firms and their growth. it is these firms, together with the multitude of highly flexible and productive small enterprises, that can make a decisive contribution to the achievement of higher levels of investment, to the introduction of advanced technology in companiesa€™ modus operandi and production processes and to the growth of savings and employment.