Speech by Prof. Paolo Savona, Consob President, to the markets

22 June 20222 years ago babelfish

We present in complete form the speech of the President of Consob, Prof. Paolo Savona, to the markets, on the occasion of the annual meeting. The reference year of the speech is 2021. The notes relating to inflation and the ways to limit its excesses and, above all, the most negative repercussions, are interesting.

Enjoy the reading

Introduction: a brief reference to the activities carried out by Consob in 2021

The presentation to the market of the Report for the year 2021 , sent at the end of last March to the Minister of Economy and Finance, is an opportunity to frame Consob's activities in an increasingly fast-moving world, focusing on strategic lines followed to propitiate technological innovation and environmental and social sustainability, in line with the indications of the European Union and with the three-year strategy approved by the Council of Ministers on November 24, 2021.

The Report is divided into twelve chapters that set out the extensive activity carried out in the year 2021 by the Commission, which took the form of 1,277 files presented to the College, which examined them during its 97 meetings, following which they were adopted 484 resolutions.

There were 19 offers to the public for purchase and exchange promoted in 2021, for a total value of approximately 7 billion euros, of which 14 associated with delisting transactions of securities from Italian regulated markets. This is an important signaling phenomenon to be read together with the choice made by some Italian entrepreneurial realities to access foreign capital markets, also by transferring their registered offices to other countries. These phenomena affect the competitiveness and development of the Italian capital market, called today more than ever to play a fundamental role in supporting the recovery and growth of the country's economy, allowing investments in digitization, innovation and sustainability to be made. For these reasons, in accordance with its functions as supervisory authority of the Italian financial markets, Consob joined the initiative launched in 2021 by the Ministry of Economy and Finance in continuity with the OECD analysis contained in the report "Capital Market Review of Italy 2020" and merged into the Green Paper "The competitiveness of Italian financial markets to support growth", with the aim of identifying interventions to rationalize and simplify the regulatory framework to make access and the permanence of companies on the Italian capital market. In parallel, Consob has also autonomously launched a process of analysis and evaluation, also through consultation with the market, of its own regulatory legislation on the prospectus and procedure for admission to listing on regulated markets, with the aim of simplifying and promoting access by businesses, in line with the initiatives promoted at European level starting from the "Final Report of the High Level Forum on the Capital Markets Union" of 10 June 2020.

To facilitate the technological transition of the financial sector, in the course of 2021, the Institute lent support to the Ministry of Economy and Finance for the purpose of preparing the Decree of the Minister of Economy and Finance of 30 April 2021, n. 100, on the conditions and methods for carrying out an experimentation relating to FinTech activities (the so-called Sandbox Decree). In order to concretely launch the regulatory Sandbox , Consob has therefore adopted the new regulation containing the discipline of the procedures for the issuance of the individual measures envisaged by the aforementioned Decree. From August 2021 to January 15, 2022, 44 discussions were held with 25 Italian and foreign companies and, among these, 15 companies submitted an application for admission to the Sandbox in the first window closed on January 15, 2022.

The action to contrast the abusive collection of savings through websites has continued, assigned to Consob with the law 58/2019, which has so far led to the blackout of 720 abusive sites, of which 246 in the course of 2021 and 120 in the first 5 months of the current year.

In 2021, the Arbitrator for Financial Disputes (ACF), operating at Consob since 2017, concluded 2,119 proceedings and recognized the rights of savers involved in 1,138 cases out of 1,650 decisions on the merits.

Intensive supervisory and investigation activities continued in connection with the United Kingdom's exit from the European Union and as of 2021 authorizations were granted to 69 investment firms, to which 14 were added in 2022, for the most part. concerning the possibility of continuing to operate in Italy for British companies that have requested it.

Last year the activity of international cooperation increased, which was divided into 223 our requests and 203 received, also in the context of 40 bilateral and multilateral cooperation agreements active with the authorities of European Member States and countries third parties.

Since February 2022, following the invasion of Ukraine by Russia, the Institute has strengthened monitoring of the markets and compliance with the restrictive measures adopted at European and national level, in constant coordination with the other national authorities and with the authorities present in ESMA ( European Securities and Markets Authority ) and in IOSCO ( International Organization of Securities Commissions ).

Finally, in 2021 two important experimental initiatives for the application of Artificial Intelligence came to maturity, part of a Consob service computerization plan, conducted by a highly specialized internal nucleus in collaboration with experts from the Sapienza University of Rome and the Scuola Normal Superior of Pisa. Algorithms have been created for the automated reading of synthetic information documents (KIDs) useful to guide the investor towards informed investments in financial products and statistical information on transactions carried out in the course of price sensitive events to identify any market abuse.

A year of economic recovery and confidence in the future

The two factors on which the country's real and financial well-being and stability are based, exports and savings, recorded a good trend also in 2021. To these was added a third, no less important one, the recovery of confidence in future, mainly following the success of the fight against the pandemic and the launch of the Next Generation EU initiative, which acted as a maieutic force in the desire for latent recovery in the country. The rise of inflation and, even more so, the invasion of Ukraine by Russia cast heavy shadows on the favorable prospects that had emerged and brought back the conditions of monetary stability, as well as those of a civil international coexistence. based on mutual understanding and constant dialogue between peoples, established by the UN Universal Declaration of Human Rights and well confirmed by the Charter of Fundamental Rights of the European Union.

We hope that peaceful international relations will be re-established which will once again allow goods to move freely, stopping weapons. Despite the many defects, globalization has allowed the improvement of the standard of living of large sections of the world population, significantly reducing poverty; we prefer to emphasize instead that it has favored the expansion of the wealth of the few, a socially unsatisfactory result, but not new in the history of the real development of the countries of the world. Since the last century, the correction of the distributional distortions of product and incomes has been entrusted, within countries, to a progressive intervention by the organs of democracy and, at the international level, to assistance between States and by NGOs, which have however operated on the whole to a modest extent. The set of these decisions was propitiated by a happy encounter between the cognitive advances of economic theory and those matured in democratic consciousness, with some applicative asymmetry in favor of the latter, as evidenced by the huge growth in public debts.

Importance of liberalization and globalization of trade for Italy

Through international exchanges, Italy has managed to join the ranks of the most developed countries and to face the serious international crises that have occurred over the last half century, starting with the intensification of the oligopolistic conditions of the supply of energy sources. have led to a structural increase in the price of oil since the early 1970s.

After the global crisis of 2008, always relying on exports and savings, our economy has managed to reach an economic balance with foreign countries structurally in surplus, a condition long sought in the past to overcome the accusation that the country lived above their own resources; this success was accompanied by a patrimonial position also in surplus towards the rest of the world, joining a small circle of countries governed by mixed political systems of free market and welfare state . Italians invest their savings abroad to a greater extent than foreigners do in Italy, another step along the way to bring more financial resources to our production activities.

The positive trend of Italian exports is the result of a long maturation of our companies which have been able to create a climate of their independence from the constraints posed by the factors of weakness of the country and to benefit from the opportunities offered by the global market and from the pressing technological innovations, often from themselves conceived; In recent years, a good availability of low cost savings has contributed to these excellent results.

Among the exporting companies, those that have been able to interpret the importance of regulated markets for their own development have received a further benefit in the form of an increase in their value certified by the market, which is more easily mobilized in whole or in part, if from they are desired or liked by investors.

The productive capital of listed companies today has a price / profit ratio far superior to that of 2008, with positive effects that are reflected in the similar ratio of those not listed on the official markets, but at discounted values due to the lesser mobility of their title deeds. The transition to regulated markets for the valuation of companies remains an objective to be pursued for the community, the achievement of which is driven by the advantages offered by equity investments for the combination of profitability of companies and liquidity of securities.

Those who manage real resources have the task of collaborating in the search for a balance in the distribution of the product between capital and labor, an unavoidable part of their social function, but also an instrument for achieving sustainable development between supply and demand at the macroeconomic level, which represents an objective of direct interest. They also have the task of internalizing environmental protection in production programs and, consequently, in the organization of the company. The satisfaction of this need invests Consob's competences, to be implemented within the framework of a broader European program, relaunched with the European Commission's Action Plan on finance for sustainable growth, on the contents of which the development of the rules that companies will have to comply with in order to incorporate requests that go far beyond the correct development of so-called green finance, involving social and corporate governance problems, known by the acronym ESG ( Environmental, Social and Governance ).

Entrepreneurial initiative and public intervention have also mitigated certain imbalances in the territorial distribution of production and income, particularly accentuated in the existing endowment of economic and social infrastructures. Progress in this direction still appears slow, with moments of reopening the existing gap such as the one we live in, but the decisions taken in the implementation of the PNRR and the provisions envisaged at European level for the lagging areas open a positive scenario for resident populations, which politics will have to demonstrate to be able to grasp with effective collaboration at central and local level.

In the most recent period, the overcoming of financial difficulties and supply shocks has been supported by permissive monetary policies, made possible by a trend in prices which tend to be deflationary at a global level. In the presence of abundant liquidity, the thrust of an aggregate domestic and world demand eager to express itself and the relaxation of the supply constraints imposed by Covid have caused an increase in the prices of many raw materials, especially energy sources, which they triggered a resumption of inflation; this, in the face of the new supply constraints caused by the war conflict in Ukraine, has strengthened the cost pressure on the factor markets, fueling the risks of social instability and financial market imbalances.

The uncertainties weighing on the future are such as to transform any economic forecast into pure conjecture; in these circumstances it would be advisable to refrain from formulating hypotheses on how the economy will go and instead devote more attention to improving institutions, to enable them to absorb economic and social shocks in order to give solid foundations to confidence in the future. This is what is being attempted, but the intertwining of the needs arising from economic trends and the need to modernize the tangible and intangible infrastructures inherited from the past distracts the attention and commitment of citizens towards the former and slows down, even hinders , the process of adaptation of the latter. A greater commitment to communication is necessary to explain the importance of institutional reforms with respect to assistance interventions, which alleviate individual situations without resolving the crises at the root.

Traditional instruments cannot be activated to protect savings from inflation
to a sufficient extent

A good teacher, Karl Brunner, taught his students that the problem of inflation is not having it, but if for any reason you run into it, the problem becomes how to get out of it without creating irreparable damage. If on the theoretical level there is no consensus on what to do, on the practical one it is now clear that the prevailing orientation rejects the use of monetary or fiscal tightening of the size necessary to significantly affect inflation and prefers a gradual and moderate approach, relying on policies compensatory tax treatment of the effects of crises; the latter, although socially understandable, lead to increases in public expenditure financed with greater debt, sometimes justifying the choice by reducing the ratio with GDP, ignoring that this happens due to the increase in its nominal value.

Nor do extraordinary financial operations appear effective and practicable, which worsen the situation because they are difficult to decide, require a long time to be implemented and contribute to increasing existing uncertainties, ending up with increasing financial and social instability.

Even the protectionist policies, often invoked, are not effective, because the weight of the required adjustments rests on the near and less close neighbors, without bringing those benefits to the distribution of income which they would like to remedy.

The world today lives in a difficult condition that entails sacrifices for citizens, which, in order to be overcome, require the achievement of unity of purpose at the national level and closer international coordination, difficult conditions to be met in the presence of internal political and geopolitical tensions. .

It follows that an alternative way must be found to prevent inflation, the unfair tax that violates the founding principles of democracy, from affecting financial and real stability, eroding the two pillars on which our growth and welfare are based.

An alternative proposal to a tightening of monetary and fiscal policy: a portfolio that protects itself from inflation

Last year, Italian savings still held up well, but the first signs for 2022 show signs of a slowdown in flows. The trend, which showed a clear acceleration in 2021, to invest in speculative instruments and in foreign markets, choices not always based on rational criteria, also emerged clearly. Entrusting the care of these attitudes to the market alone, often prompted by forecasts that reality has taken it upon itself to deny, could cause serious economic and social consequences, as well as being in contrast with the constitutional provision that considers saving a public good. .

A first step to be taken, which falls within the objectives pursued by Consob at the beginning, but which has become urgent to take, is to channel savings towards the production initiatives of companies of all sizes. It is true that the close relationship that had been established between monetary policy and developments in regulated markets is causing fluctuations in the value of companies that discourage such investments, but a closer and healthier relationship is emerging between prices and profits, on which inflation operates favorably, because price increases affect the global market and do not deeply affect the terms of trade between national and international companies. Inflation mainly affects final consumers whose resources come from substantially fixed incomes and savers who have invested in debt securities.

The strengthening of the representative component of the productive activity towards which to direct the savings finds legal validation in art. 47 of the Constitution where it is said that protection is obtained with the “ direct and indirect encouragement of the share investment of popular savings in the large production complexes of the country ”. These investments offer a robust basis for integrative and self-managed welfare by the members of a society with low productivity and fertility; addressing the aging of the population with a pension system largely anchored to solidarity sharing methods does not seem suitable for the purpose of serving the life cycle of citizens well and guaranteeing real and financial macroeconomic stability.

A second step is to create portfolios that self-protect savers from inflation, in which investments in proprietary securities play a primary function. The proposal provides for a balanced composition between securities and real estate assets, entrusting profitability to the trends of the real economy, thus relieving monetary policy of the burden of unusual maneuvers on interest rates. The technical solutions can be different and politics would have the main task of creating the most suitable legal structure of acceptance, to give life to a protective mechanism of savings that satisfies the constitutional dictates.

It should be noted that a dimensional balance between securities and real estate assets is already present in the aggregate stocks of our savings, despite the fact that they are not subject to the same rules, especially, but not exclusively, tax rules. In other words, there is an innate thrust in the saving behavior of Italian families and companies, given that the two components have always proceeded in a fairly balanced way, despite the wide differences in their treatment and the delays in the redevelopment of buildings in terms of sustainability. A similar attempt undertaken at European level, albeit limited, but which can be integrated with the proposed proposal, is that of long-term investment funds (ELTIF) and individual savings plans (PIR), the latter implemented in Italy in particular.

The self-protective capacity of such a portfolio against inflation would be even more effective if the saver decides, in a balanced way with respect to the euro, his investments denominated in foreign currencies used for exports.

Obviously, issues of BTPs indexed to internal inflation, such as the one scheduled for this week, are well appreciated by savers because they protect the real value of the investment for a long period, testifying confidence in the solidity of the public debt and receiving confirmation from the authorities. , of the validity of the protective request advocated here.

The rationale of the proposal rests on the fact that securities with a yield below the rate of inflation suffer a loss of purchasing power, while real estate assets usually show increases in value.

The proposed solution has the advantage of not placing greater burdens on the state budget and would be in line with the constitutional provision that encourages and protects savings " in all forms " and " favors the access of popular savings to home ownership " and “ To the direct farmer property ”; the latter destination must be assessed in the light of the successes recorded by exports of agri-food products, the result of initiatives that have grown over time following the implementation of this specific constitutional policy.

On the ways to protect savings and on the consideration that this is a primary political objective, the disputes date back to the works of the Constituent Assembly and do not appear to want to be attenuated. The mandatory reference on the subject, together with the distributive justice of the tax burden, are the writings and political commitment of Luigi Einaudi, whom we intend to remember as one of our great teachers.

The protective bulwark erected in the post-war period for securities savings was identified in assigning to our central bank the task of defending the purchasing power of the lira while enjoying independence in monetary choices. The institutional events and crises that have followed one another since the end of the Bretton Woods Agreement (1971) have made the fulfillment of this task more complicated for our central bank, whose choices today must be reconciled with those of the other national central banks. present in the ECB and with the conditions prevailing on the global market.

A first calculation on the validity of the assumptions underlying the proposed proposal indicates that, from 2008, the year of the global financial crisis, to 2021, inflation affected the purchasing power of Italian financial savings in the overall order of 16% (Istat data) , to which is added the fall in value of our properties of 12% (BIS data). If the existing portfolio had had the characteristics proposed, the overall loss would have been 14%, partially recovered if a balanced currency composition had been followed; in fact, taking into account that in the period considered the dollar appreciated by 23% against the euro, a portfolio whose half of the assets had been denominated in the American currency would have reduced the loss indicated to 2.5%, acting in the direction of self-protection.

In the same period, wages recorded satisfactory protection, as hourly wages increased on average by 21% (Istat data), fully recovering inflation and benefiting from the low average productivity of labor (3.8%). The seven categories of pensions paid increased on average by 34% (INPS data); this percentage induces to reiterate the request that, in an economy characterized by strongly asymmetrical frequency distributions, the averages should be accompanied by kurtosis indicators to assess whether they correctly represent the observed phenomenon.

The trends in the two-year period 2020-2021, tormented by supply constraints for health reasons, further accredit the validity of the proposed proposal, highlighting that the compensatory mechanism between the incidence of inflation on movable assets and the increase in property values has the hypothesized characteristics , even in the absence of a policy that aims to equalize the treatment. The first data for 2022, also affected by supply constraints following the invasion of Ukraine, show rising inflation, rising property prices, the dollar still slightly up against the euro, wages steady hours and falling stock values.

The virtuous circle created by encouraging and protecting savings

The implementation of the proposed proposal for an incentive and protection policy for savings would represent a concrete response to the need and the will, repeatedly expressed, to direct it towards productive activity, as it would channel it towards the formation of new capital, given that at every real estate investment, which would incorporate the property and debt securities of production companies, would correspond to a proportional amount of real estate investments, which historically have played a leading role in the phases of production and employment recovery. In the proposed solution, financial and productive capital would be the two sides of the same coin present in each freely constituted portfolio, with positive effects on the macroeconomic framework.

Doing so could also reduce that part of finance that generates income dissociated from the trend of the real economy and relaunch the part that drives productivity, the driving factor of an economy open to competition, like the Italian one.

Credit protection is another objective expressly indicated in the constitution, whose destination in favor of development is legally and economically linked with that of encouraging and protecting savings. A serious attempt to fully satisfy the constitutional values in this matter dates back to 2005 with law no. 262, which provided for the creation of a Commission for the protection of savings and a Guarantee Fund for savers and investors, governed by principles established by a Statute of savers and investors. The implementation proxies to the Government and Parliament have expired since the time prescribed by law has elapsed, also because the task was largely undertaken and integrated by the European Union. Following the emergencies created by some serious financial crises, the Guarantee Fund was replaced by the use of the Dormant Accounts Fund and, subsequently, by the launch of the Fund for the extrajudicial protection of savers and investors, managed by the ACF , whose resources also draws the initiative to increase the indispensable financial education.

In conclusion, the set of initiatives examined, integrated by a policy oriented towards the individual and systemic creation of a portfolio that self-protects savings, could contribute to establishing solid foundations for the recovery of confidence in the future, triggering a virtuous circle of economic development and social stability.

Clarify the institutional framework within which the currency and financial assets in centralized digital accounting or decentralized encrypted will operate

In the last few decades, the monetary and financial problems to be solved have become even more complicated due to the proliferation of the many forms of virtual securities, which started with Bitcoin and multiplied under the now generic name of cryptocurrency . At the time of birth, they are portfolio assets without an administrator and accounted for in a decentralized way on computer networks that directly connect the holders. On their disordered quantitative development, obtained on a mainly conventional basis between private individuals and with the hybridizations they made of many traditional financial instruments (derivatives, credit, bonds and the like), Consob, the Bank of Italy and IVASS have issued with warnings addressed to investors on the risks incurred, collaborating with the authorities in the fora where the matter is examined for regulatory purposes.

Beyond the choices to be made for the treatment of virtual instruments and the techniques used, it is also necessary to define an overall institutional framework for the problems that have arisen, which calls for the convening of an international conference to restore the proper functioning of the global monetary and financial system or, at least, of that part of the world willing to collaborate in this direction. In this sense, the President Ashley Alder of IOSCO, of which Consob has been a member since its inception, made a pronouncement. The same indication was given by the new OECD Director of Financial Affairs and Businesses, Carmine Di Noia, in implementation of a Recommendation approved by the Council of the Institution on encrypted and decentralized accounting technologies.

In the recent meeting of the G7 finance ministers, the urgency of regulating the different forms and uses of cryptocurrency was reiterated, providing the precise indication that virtual instruments must be treated like traditional ones, whose rules are the result of over a century of experiences and refinements still valid today.

We agree with the need to convene an international conference, which has on its agenda the inclusion of the cryptocurrency market in the existing standardization, but does not neglect the implementation of the innovative accounting techniques used by finance.

The goal of achieving market and legal structures for virtual instruments that follow traditional solutions – the verification of the conduct of the market through the granting of authorizations, the application of supervisory regulations, the imposition of administrative sanctions and interactions with the civil and criminal judiciary – is easier to integrate with the decentralized accounting and IT technologies that all operators, after a period of hesitation and evaluations, have now acknowledged or are planning to do. They have generated new applications by the most skilled and increased the opacity of the market, with some significant expropriation of the savings invested. The attention of public authorities has focused on these problems in the various cases of regulators, supervisors and judges, who however encounter difficulties in regulating and judging due to the fleetingness of the means used, preferring to concentrate on the behavior followed.

Even taking into account the high set-up costs that require their acceptance, the use of new technologies offers potential advantages, such as the reduction of the time and costs of custody and trading of monetary and financial assets, as well as the certainty and immutability of accounting records. connected, which guarantee a higher degree of impenetrability from external attacks than traditional activities. After the global financial crisis of 2008, operators, managers and savers added a desire for independence from the official market certifiers. The different forms of decentralized accounting (DeFi) and financial technologies (FinTech) form intersecting universes, where the more rapid evolution of the former leads us to believe that particular regulatory attention should be paid to them; this is equivalent to recognizing that there can be no technologically neutral standardization of virtual instruments, even if the innovations are pressing and require individuals and authorities to follow their evolution.

This complex reality is examined with traditional clarity in the document published at the end of last week by the Bank of Italy concerning decentralized technologies in finance and the different forms of crypto-assets, to which we refer.

In light of advances in the ability to create gigantic collections of digitized data in an easy-to-use unified language using increasingly powerful computers, capable of processing them quickly with the methods offered by rapidly evolving data science, computer science, are the technological innovations the real problem to keep in mind when deciding on a rapid adaptation of the regulation, also in view of the progress expected from the application of quantum logics.

As evidenced by the aforementioned document from the Bank of Italy, the cognitive progress on virtual instruments and their intermediaries or service providers in this field have reached a satisfactory level to proceed with regulation. However, there remains a confusion arising from the indistinct use of the term digitization. If the purpose of the new legislation was to move to a mere digitized computerization of the entire monetary and financial activity, which is already in an advanced course of application, without regulating the encrypted and decentralized accounting technologies used to obtain the information necessary for the supervisory authorities, The opacity of the market would worsen and, consequently, the allocative efficiency of the resources that we expect from transparent and well-regulated negotiations would suffer.

Once it has been clarified whether money and financial instruments will be kept in centralized or decentralized accounts in digital form, explicitly considering the differences between the block-chained accounting of Bitcoin ( blockchain ) and that articulated in different ways of the other cryptocurrencies (DLT), the next step to be carried out is the processing of information using Artificial Intelligence techniques, which provide an objective, ascertainable and non-modifiable basis for portfolio management of all types, including those of the type proposed here.

The framework of the regulatory decisions to be taken passes from the clarification on the practical form that some basic components of the traditional money and financial market will take, such as the transformation of money into CBDC ( Central Bank Digital Currency ), the existence of stablecoins and the spread of securities. tokenized. We do not intend here to propose a specific solution, but a clarification on the form that will be decided, not necessarily accompanied by an explanation of the reason for the choice, as we cannot delude ourselves, as monetary history teaches, that it will be validated only after a phase of practical experimentation.

In the numerous documents produced by the authorities, there is no univocal answer on the morphological characteristics that the CBDC will assume, at a national or monetary area level and, above all, in international payments. In particular, it is not clear which DLT accounting technology will be used; frequently, in discussions and in regulatory proposals it is taken for granted that decentralized accounting, certainly the most widespread, are not those linked to impenetrable blocks of Bitcoin ; however, if these are present in complex virtual instruments or hybridized with traditional ones, the accounting treatment technique must be explicitly considered, in order to guarantee the existence of a "node" that allows the authorities to collect information to transfer their internal transparency and correct the outer opacity. This aspect of the problem is not the only one that requires urgent clarification.

In fact, if it is decided that virtual money will be an integral substitute for the current monetary base and relative fiduciary money, bank deposits would exit the circuit of monetary creation that make up M2. Banks would continue to manage, if authorized and if they wish, the payment system and the savings that will flow to them, but they will have to compete with existing technological platforms, which are better equipped and organized on a digital and IT level.

Whatever the choice, public legislation on the subject would restore the monetary monopoly and regulatory power of the States and their international agreements, today significantly left to the will of cryptocurrency operators, who have given themselves their own rules, spontaneously accepted by customers, and they went so far as to establish the criteria for the direct management of any conflicts by the platforms themselves, expropriating the state judiciary. Investors show appreciation for the services of these intermediaries, despite the management being not very transparent, but they can hide illegal behavior and vulnerability of the technologies used, as evidenced by recent episodes of scams and hacking. It is hoped that the holders of virtual instruments are aware of fully assuming such responsibilities, even if they can invoke the involvement of the authorities on the basis of the observation that partial public interventions have legitimized the presence on the market of cryptocurrencies and their hybridization of traditional instruments.

A more extensive use of Artificial Intelligence will allow for a more solid basis for controlling the work of all market operators, including banks, which will not only benefit intermediaries or financial service managers, but also savers and the community in the as a whole.

If, as we hear contradictingly repeated, stablecoins were legitimized and banks made use of them, the legislation in progress will require even more profound changes, having to include the treatment of stability reserves; to this end, it will be useful to take into account the experience which ended in 1971 of public governance of fiduciary money convertible into metal instruments (gold and silver) and that still in progress of the mathematical reserves of insurance companies. The recent crisis of two of the most important companies dealing with stablecoins testifies to the misunderstanding of the concept of stability applied to cryptocurrencies and the potential gravity of keeping the problem of their regulation inclusive of the forms taken and techniques used unresolved.

The use of innovative accounting technologies in the form of tokenization of traditional financial instruments raises fewer problems and is more useful, but it too requires a precise definition of rules for their insertion into the existing framework of market and corporate regulation. Even for these virtual forms, the attribution to the supervisory authorities of the power to enter the decentralized circuit to supervise their activity remains decisive. Once the institutional morphology that central bank money and commercial bank funding will take on has been clarified, the integration between traditional activities and innovative accounting technologies appears easier to grasp the advantages of technological innovations applied to finance.

In Italy, what can be considered the first tokenization initiative, having an experimental value, has taken on a prudential form, with the issue of traditional certificates replicated simultaneously in a virtual form ( mirrored ); experiments that go far beyond the hybridization of traditional instruments by virtual ones are already in sight, if the tokenization of real estate assets were to be affirmed, as announced by a leading bank operating globally; the decision would make a positive contribution to the proposal made here to create self-protective portfolios against inflation. If this were to happen, an important part of real savings would be transferred to the infosphere, the developments of which aim to embrace every aspect of the economic and social life of those who wish to join.

The consequent redefinition of Consob's duties

A clarification on all these aspects of the application problems of virtual accounting technologies and of the consequent morphology of monetary and financial assets represents the indispensable basis for adapting the tasks and organization of all the supervisory institutions of the securities markets; obviously also by Consob, already subjected to a continuous commitment to follow the growing complexity of the markets and the internal and international expansion of the legislation, in a situation of scarcity of financial resources that flow in the ordinary way and have recorded a reduction as a result of the difficulties in which, except for a few months of rest, the country's economic activity has been debating for over two years.

Consob currently has the main task of ensuring the transparency of the transactions that take place on the financial market subject to its supervision and the correctness of the conduct of market operators, intended not only as a verification of consistency with current legislation, but also as a way to incorporate the instances of shared value creation to undertake a sustainable development path on a stable basis.

The principles that govern Consob's activities have their roots in the era in which the distinction between money and finance was quite simple and clear. The banks performed almost exclusively the functions of collecting most of the savings in the form of deposits, benefiting from the guarantees offered, from the functions of lenders of last resort to the existence of a crisis resolution and deposit protection mechanism, accompanied by a well-equipped supervisory activity. That context has changed as a result of the regulatory passages encouraging the new forms of financial management of savings, from mutual investment funds established in 1983 to the transformation of the banking system, from specialization to universal forms decided in 1993 to the confluence of the lira into the euro approved in 1998 and the growing liberalization of monetary and financial exchanges, especially in the EU.

The impetus for the growth of financial market activity deriving from these and other changes in the global architecture of finance has enabled Italy to achieve in particular the significant results already mentioned in real and financial relations with foreign countries, with positive internal reflections, which now have to deal with the new isolationist trends of countries from global competition and the effects due to the growing quantitative and qualitative development of virtual instruments.

In the new context, the institutional problem to be solved goes beyond the forms of regulation of the creation, negotiation and accounting of the new instruments and the links that they have established with traditional activities, and involves the roles of the various supervisory authorities of the securities market, not only internally, but also at the European level, to define the contents of the new European Union of national capital markets with respect to those of the supervisory institutions already operating; it will also be essential to know the institutional structure which, in fact or through agreements between countries, international monetary, financial and real exchanges will assume.

Conclusions: protect savings, define the rules of technological competition in finance and fight regulatory competition

The situation in which we live can be considered similar to that described in the comedy The Birds of Aristophanes, where, among the sellers of oracles and decrees, Meton, the astronomer, as well as Greek mathematician and philosopher of the fifth century BC, enters the scene. He recalculated the lunar cycles with the few instruments then existing, which popular legend ironically defined as "curved square" and "square circle". The mockery also went beyond the comedy, because Meton was thrown out of the Athens of the time as a madman; this condemnation, fortunately no longer physical, is always pending on today's Metonians who run the risks inherent in anticipating economic analyzes, innovative techniques and political proposals in contrast to the existing rules and prevailing ways of thinking.

Today we have technical tools, the result of a much more advanced science than that of Metone's time, which makes use of increasingly powerful computers to accommodate innovative logical languages, now without borders. It is now a question of creating and using a reserve of professionals capable of using new “teams and circles” generated by the inventiveness and realization skills similar to those of the Greek philosopher, which remain indispensable components for human progress; it can be safely stated without rhetoric that these qualities abound in Italy, as evidenced by the achievements achieved by our exporting companies and the top positions held by many young Italians scattered around the world in companies operating in the infosphere.

It is now urgent to define the rules for a correct and transparent use of technological innovations in the composition of securities portfolios, as an indispensable part of protecting savings. An important step is the definition of the morphology that public money will assume and whether a private currency will survive, identifying the effects of the choice that will be made on the current banking and financial system.

A significant part of Italian companies, especially those that could strengthen the range of listed companies, are moving to foreign stock exchanges or financial markets, because they are attracted by regulatory advantages offered by other countries and not present in our system or, more simply, discouraged by administrative complexity of the procedures required to access and remain among listed companies. It has already been indicated on what lines Consob is moving with the competent authorities in view of a simplification that halts a possible deterioration of our financial ecosystem and conducive to an expansion not only of regulated markets. In this context, a profitable expansion of intermediaries is taking place, intervening in different forms to support companies that deserve funding, attracting and investing well the resources of the most far-sighted savers.

The agreement between the Italian Stock Exchange and Euronext is a training ground in which the forces that aim to expand the activity of trading that take place on a regulated basis and to make Italy's specific regulations disappear in the European context should emerge. We rightly hear it repeated that this must not happen as a result of our adaptation to regulatory competition by European and non-European financial markets, but must contribute to creating a level playing field for everyone, where the reference to the profitability of companies obtained with advantages regulations disappear, bringing out the contents of their ability to manage innovative technologies, as well as labor and financial resources.

In this complex action we have held constant consultations with the MEF, the Bank of Italy, the AGCM, IVASS, COVIP, the criminal, civil and administrative judiciary, the State Attorney, the Council of State, the Guard of Finance, the Postal Police and the OCF and, in particular, benefited from the collaboration of the COMI, the Committee of Market Operators and Investors. Our deepest gratitude goes to all these institutions.

I extend my thanks to the staff who have faced their work commitments amidst the difficulties that have arisen in the last two years following the constraints posed by the health pandemic and the rapid evolution of the markets. I invite everyone to face the necessary changes with courage, for their own well-being and for that of the entire country.

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The article Speech by Prof. Paolo Savona, Consob President, to the markets comes from ScenariEconomici.it .

This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/discorso-del-prof-paolo-savona-presidente-consob-ai-mercati/ on Tue, 21 Jun 2022 11:30:19 +0000.