Financial education – The Bank of Italy’s perspective Sofia, June, 29th 2010

1. Financial education – The Bank of Italy’s perspectiveSofia, June, 29th 2010 Maurizio Trifilidis Bank of Italy

2. The provision of financial education is increasingly urgent. • Financial literacy: • essential to households’ well-being • vital to our economic future • “We are living in a world where people are being expected to take greater personal responsibility for their long-term financial well-being” (Otto Thoresen 2008) • Some examples

3. The Italian case. • Greater complexity in financial market • Increasing indebtedness and responsibility for after-retirement needs • The financial literacy of the Italian population (Source: BoI): • about 50 per cent of Italian households do not possess the basic knowledge required to make informed decisions on the most common financial transactions • about one third of the population are unable to read a bank statement, calculate changes in purchasing power, distinguish between different types of mortgage and evaluate the associated interest rate risk. • more than half of the Italian households do not understand the importance of investment diversification, and two thirds of the population do not know the difference between shares and bonds in terms of risk • Less than one household out of three knows the main features of supplementary pension schemes

4. The Italian case. Source: Banca d’Italia, Household Income and Wealth in 2008

5. The Italian approach. Who should provide financial education? Whoever is in the position to provide a qualified contribution: • government • central bank • authorities supervising the banking and financial systems, the pension funds, insurance and securities industry • the private sector

6. Actions by private players. • Banking association (ABI/Pattichiari) • Informative booklets, collaboration with a tv channel to create educational contents • Cooperative banks’ association (Federcasse) and their local organisations • Seminars, conferences, initiatives for the unbanked, interactive sessions in schools • Other Intermediaries’ Associations (Assogestioni, Assofin) • Websites • Charitable institutions (Caritas) • Consultancy services for debt and finance management • Media • Publications: books, leaflets, cd-roms

7. Actions by public players. Bank of Italy, in cooperation with the Ministry of Education, has launched a “FINANCIAL EDUCATION IN SCHOOLS” PROGRAMME

8. The importance of financial education in schools. • It takes time to build skills, and provide people with information they need; • decisional processes are made more difficult by lack of confidence; • compulsory school education represents a reachable and teachable moment; • possibility of spill-over effects: more literate students might affect financial behaviour of the parents.

9. Ministry of Education - Bank of Italy.Financial education for schools. • The project is based on a Memorandum of understanding with the Ministry of Education • What: provide students with the appropriate economic, financial and monetary education • How: • training teachers and developing teaching methods; • developing an information kit on financial education

10. The project: two editions. • 2008/2009 school year (primary to high schools) - 3 towns (north, centre, southern Italy) • 2009/2010 school year - 250 schools & 8,500 students – entire national territory

11. The project: implementation (1). • Literacy measurement before lessons • Lessons on “Money and payment instruments alternative to cash” • Educational material development: Bank of Italy’s experts; teachers could also use their own selections of texts • Literacy measurement after lessons

12. The project: implementation (2). Literacy after lessons Literacy before lessons Effect of lessons Literacy Lessons on “Money and payment instruments alternative to cash” Literacy presumed without lessons (control sample ) T=0 T=1

13. The project: results. • Primary schools: the highest percentage of correct answers in first test session. • questionnaires for elementary schools were focused on general notions children learn in their daily life (saving and money); • natural bent of young children to be stimulated by their social, environmental and family background. • High schools: higher rate of improvement after the teaching cycle. After the lessons the percentage of correct answers was very close to that recorded in primary schools and higher than that in junior high schools.

14. Proposed actions. • Methods to measure the effectiveness of the teaching program in terms of increased knowledge and its influence on financial behavior will be improved (Cooperation with the Einaudi Institute for Economics and Finance). • Drafting of the new supporting materials for teachers on: the banking system, the role of the Bank of Italy, price stability, investment options and the relationship between risk and return

15. The way ahead… • Cooperation • Coordination: designing a common path • Among Public Authorities • Partnershippublic/private sector and individuals • Need for international exchange

16. Inter-Authority cooperation. • Banking, Financial markets, Insurance and Pension funds Supervisory Authorities - Bank of Italy, Consob, ISVAP, COVIP - have devoted a section of their website to financial education; • Antitrust Authority (AGCM) has developed initiatives to promote awareness in purchase decisions • On June, 9th 2010 these Authorities have signed a Memorandum of Understanding to: • Set up of a common web portal – clearing house for all of their present and future internet contents • Lay the foundations for future collaborations

18. The way ahead. • Cooperation • Coordination : designing a common path • Among Public Authorities • Partnershippublic/private sector and individuals • Need for international exchange

19. Definition of a national strategy. • B. of I. is closely following the Bills currently under discussion in the Senate • The Bills have coordination issues in the provision of financial education as its main concern • For this purpose, they aim at setting up a Committee entrusted of developing of a national strategy • The Committee shall include representatives of as many stakeholders as possible

20. The way ahead. • Cooperation • Coordination : designing a common path • Among Public Authorities • Partnershippublic/private sector and individuals • Need for international exchange

21. OECD-Bank of Italy Symposium on financial education. • OECD: Research, recommendations, international coordination • Working Group: INFE • Includes 100 institutions from 55 Countries • Favours international cooperation and spreads best practices. • International Symposium – twice/year • Main topics addressed: • Measurement of financial literacy • Evaluation of initiatives’ effectiveness • Programmes at school

22. Bank of Italy - other proposed actions. • A twinning project with schools in Uk and Italy The purpose of this project : • Enhance learning and teaching in the area of financial education • Encourage the development of financial capability in the context of life long learning • Developing other inter-disciplinary areas of the curriculum • Increase awareness of European citizenship • Improve understanding of economic and financial matters • Establish professional relationships between Italy and Scotland • Establish a ‘joint money week’

23. THANK YOU FOR YOUR ATTENTION maurizio.trifilidis@bancaditalia.it