ex ante safeguards consisting of a sound, robust and resilient non - bank financial intermediation system. 19. this issue is particularly relevant at a time like this, when central banks are moving away from the ultra - accommodative monetary policies of the recent past, as the british gilt episode clearly shows. regardless of the fiscal policy issues that triggered it, the episode stems from a structural mismatch between the maturities of the assets and those of the liabilities of local pension funds. in order to avoid its destabilising potential, the bank of england was forced to act in a way that made the implementation of its monetary policy exit strategy more complicated. easing such trade - offs would help make the simultaneous pursuit of monetary and financial stability more effective. banks 20. the banking system is also affected by the normalisation of monetary policy. 21. the impact of the new stance will be visible firstly – and to some extent it already is – on net interest income. long hindered by low interest rates and a flat yield curve, traditional banking is making a comeback as a significant contributor to profitability. in the first six months of this year, when policy rates had not yet been changed but tightening expectations were already being incorporated, at least in part, into market rates, italian banks'net interest income rose by 9 per cent compared with the same period a year earlier. the increase in policy rates and in the slope of the yield curve will lead to further net interest income growth, at least in the short run. 22. this positive effect is likely to fade as rate hikes feed into interest expenses as well. some 20 per cent of total bank bonds outstanding will mature in the coming year. these securities have already seen their secondary market yields rise substantially since the beginning of this year, in line with money market yields. furthermore, bond funding is set to increase in compliance with mrel requirements and to replace, at least in part, tltro iii refinancing operations. 23. however, the effect of this on net interest income is expected to be positive overall. our estimates, which incorporate the bank of italy's most recent macroeconomic projections, suggest that net interest income could rise on average by around one fifth per year over 2022 - 24. 24. secondly, the increase in interest rates has a negative impact on the valuations of securities held for trading. this will weigh on the income statement, in terms of profit or loss

, some have become state - owned via rescue programme. their systemic importance has risen further along with their market power, and regulation must rise up to the challenge. the interdependence of the financial sustainability of these financial giants and sovereign risks have become increasingly linked, while perception of state guaranty of such institutions may distort local or even global markets, creating un - level playing - field. the demand for accountability for public bail - out money puts pressure on managing such banks, which have now become “ public institutions ”. thus, the intervening authorities face a strong risk of having to micro - manage the institutions, and with this the associated risks, not least reputational and legal. timely exit is important for the reason cited. exit policy however could also be complicated, for example if recovery value of bailed - out fund is under pressure from weak market conditions. most importantly, it is important to observe that, the precedence set by the actions regulators took in such intervention could have a long - term implication. we may very well be setting a new expectation, standard and text - book for bank resolution, and it may not be the standard we want to set going forward. moral hazard and time inconsistency are always difficult subjects. for financial institutions in the seanza region, many regional financial institutions, thus far unaffected directly by the crisis, are also moving into new markets, such as expanding regionally. indeed, there is some indication of search for yield, as managed funds start to flow overseas to markets which have attractive risk - return prospects, for example due to prospect of faster recovery, or due to some distortion created from implicit risk - guaranty on certain asset classes as a consequence of rescue package. in some countries, certain asset classes such as real estate may be benefiting from ample liquidity, giving rise to concern on asset bubble. all these spell potential for increased volatility and demand increased vigilance on management of risks, not only for those arising from country risk and market risk exposures, but also to exposures from counterparty and liquidity risks arising, for example, from hedging positions in otc markets. some of these risks, such as country risk, may have hitherto been marginal for regulators in emerging markets, but going forward things may change quickly. moreover, with credit - play still a very risky and expensive business, with lending subdued by low demand for loans, treasury return could be a potential profit centre, especially