70  Hutton (2015) discusses the need to repurpose companies better to reflect longer-term objectives. 71  See Mazzucato (2013). BIS central bankers’ speeches  13  References Acemoglu, D (2009), “Introduction to Modern Economic Growth”, ISBN: 9780691132921. Acemoglu, D and Robinson, J (2013), “Why Nations Fail: The Origins of Power, Prosperity and Poverty”, ISBN: 978–1846684302. Aghion, P and Howitt, P (1997), “Endogenous Growth Theory”, ISBN: 9780262011662. Arthur (2011), “The second economy”, McKinsey Quarterly, http://www.mckinsey.com/insights/strategy/the_second_economy. available  at:  Arthur (2014), “Complexity and the Economy”, ISBN: 978–0199334292. Attanasio, O and Blundell, R (2014), “Human Capital in the 21st Century”, presentation at the “Capital in the 21st Century” conference hosted at the Bank of England on December 19 2014. Slides available here: http://www.cepr.org/sites/default/files/bank%20of%20england.pdf Bannerjee, A, and Duflo, E (2012), “Poor Economics: Barefoot Hedge-fund Managers, DIY Doctors and the Surprising Truth about Life on less than $ a Day”, ISBN: 978–0718193669. Barro, R and Lee, J (2013), “A new data set of educational attainment in the world, 1950–2010”, Journal of Development Economics Vol 104 Pages 184–198. Becker, G (1965), “A Theory of the Allocation of Time”, Economic Journal Vol 75 Pages 493–517. Berglas, A (2012), “Artificial Intelligence Will Kill Our Grandchildren (Singularity)”, available at: http://berglas.org/Articles/AIKillGrandchildren/AIKillGrandchildren.html. Bernanke, B (2011), “Global Imbalances: Links to Economic and Financial Stability”, speech given at the Banque de France Financial Stability Review Launch Event, Paris, France. Bresnahan, T, Stern, S, and Trajtenberg, M (1995), “Market Segmentation and the Sources of Rents from Innovation: Personal Computers in the Late 1980’s”, NBER Working Paper 5726.

The low interest rate environment is with us for the foreseeable future and is caused in large part by durable structural factors.10 The interest rate below which monetary policy is accommodative has fallen in the euro area, as is the case in much of the developed world.11 Even once monetary policy normalises, interest rates are likely to remain below levels that were common in previous decades. Cost inefficiencies The second source of low profitability for euro area banks is enduring cost inefficiencies. Cost-toincome ratios remain high in the euro area relative to international peers. The euro area has too many banks, too many branches and too many bankers. The aggregate cost-to-income ratio of euro area banks reached 66% in 2018, up from 62% in 2010, as the dip in revenues was not offset by cost containment. While similar to that of peers in Japan and the United Kingdom, it is above the ratio typical for US banks, and substantially above the ratio of roughly 50% for Nordic banks. Reducing costs requires grasping the opportunities offered by technology. Banks have been able to make greater reductions in the density of the branch network in countries where the take-up of online banking is higher. The number of branches in the Netherlands and the Baltic states has halved since 2008, but progress in other countries has been much more limited. Technology can also help enhance operational efficiency by improving processes for loan origination and servicing and enable workloads to be shared better across employees in multiple locations.