all collateral types. overall, banks recoup on average around 25 % of the excess liquidity charge in both secured and unsecured funding. it is worthwhile remembering that we set monetary policy to honour our mandate, not to support financial sector profitability. that being said, i do recognise that the longer unconventional measures remain in place, the greater the impact they will have on financial sector profitability. it is important that they are used only for as long as is necessary to achieve an inflation rate in line with our definition of medium - term price stability. moreover, as the bank for international settlement has recently found, there seems to be an independent role for nominal interest rates in the transmission process, regardless of the level of real rates. first, monetary policy transmission could be weakened by the headwinds that arise in the aftermath of balance sheet recessions. second, inherent non - linearities could kick in when interest rates are persistently low and might dampen the interest rates ’ impact on spending. but let us also not forget that profitability is weak in many european banking systems for deeper structural reasons that predate the crisis and current monetary policy settings. europe remains overbanked, insufficient progress has been made on the overhang of non - performing loans since the crisis and there is increasing competition from fintech companies and non - banks. in such an environment, what then can be done to bolster bank profitability? first, there remains significant scope for domestic consolidation in some large countries and cross - border consolidation in europe. the ratio of banking sector assets to gdp in europe far exceeds that in the united states or here in japan, and individual european banks are on average much more leveraged. overbanking results in lower margins, a higher risk of the loans granted eventually turning sour, and banks operating away from the efficiency frontier with a consequently higher cost to income margins. during the crisis we witnessed the fracturing of interbank markets along national lines, and the negative spill - overs between sovereign indebtedness and banking sectors in a number of countries. there are a number of benefits from a truly european banking system. a more consolidated sector is likely to help overall profitability and boost resilience. individual banks would be exposed to a more diversified set of risks, and less vulnerable to downturns in individual countries, helping to break the link between banks and sovereigns. at the same time, a europe - wide banking system is an important step towards completing economic and monetary

##ary risks and further policy rate cuts by the ecb have faded and focus is beginning to shift towards a normalisation of policy in the future. indeed, as the governing council has recalled recently, if the euro area economy recovers and inflation proceeds further on its path towards the ecb ’ s inflation aim in a sustained manner, a discussion on policy normalisation becomes warranted in the future. any such discussion should, of course, take place in a structured, orderly and appropriately prudent manner and the governing council is convinced of the need to continue an accommodative monetary policy stance without deviation from the announced measures under implementation to be expected. but we could examine the interaction of our different policy measures and their functioning in a new environment of balanced prospects as opposed to the environment of deflationary risks that prevailed when they were first introduced. as has been stated, our forward guidance needs to be aligned with an evolving assessment to underpin both the consistency and credibility of our communication. prospects for the banking system in this context, it is imperative that the banking sector is well - positioned to foster sustainable growth in the coming years as the exceptional levels of monetary policy support will be adjusted in line with the progress towards our policy objective. a well - functioning, profitable and resilient financial sector is vital for the long - term economic prospects of the euro area. allow me, then, to make three remarks on this topic. my first remark relates to bank profitability. as i have just discussed, the ecb ’ s unconventional monetary policy measures have been successful in fulfilling their intended purpose. but that is not to say that they did not have any side effects. they have drawn criticism for their 2 / 5 bis central bankers'speeches negative effects on financial sector profitability. i believe such criticism is somewhat unbalanced. in the absence of the recovery generated by these unconventional measures, unemployment would have been higher, credit growth lower and a greater proportion of loans would have been non - performing. all of these things would have weighed on banking sector profitability. moreover, while acknowledging that banks face a charge because of the negative rates policy, internal data show that this burden is alleviated by the benefits gained in wholesale funding markets. between january and march 2017, on average, two thirds of overnight unsecured funding was raised at an average rate of around – 46 basis points, essentially through counterparties having no access to the ecb facilities. similar developments were observed in the secured markets for