%, which, while still high, is certainly manageable. nevertheless, there is still room for greater consolidation because their cost ratios, while not the highest in the euro area, are still too high. profitability remains weak, although there are substantial differences between banks. while there is a need for more consolidation, preserving a diverse banking system, with both large and local banks, remains important. the banks are blaming low rates for their reduced profitability. yes, they are, but at the same time they are also recognising the favourable effects of low rates on improved economic conditions and the need to change business models and reduce costs. over time, the economic recovery will increasingly support bank profitability. the deposit rate will remain low, but the last series of targeted longer - term refinancing operations ( tltros ) that helped banks have already come to an end. the banks benefitted greatly from these operations, which were heavily subscribed. the transmission of the ecb ’ s stimulus measures through the banks is working well at the moment. credit conditions have improved sufficiently, so there is currently no need to renew the tltros. and what about the sequencing of monetary policy normalisation? the current sequencing of monetary policy normalisation makes a lot of sense. there is no number, period of time in months or anything like that which will determine when interest rates go up after the debt purchases end. this will happen based on the ecb ’ s assessment. it will depend on the kind of situation we find ourselves in. and the deposit rate? the deposit rate is the key monetary policy rate. it is the deposit rate that is currently driving monetary conditions and will in the end shape the risk - free asset curve. if the markets were to pick up any change in communication about the deposit rate, it would have the potential to change the policy stance, and we do not want that to happen right now. 3 / 3 bis central bankers'speeches

##ness of our stance. but from april the ecb will reduce its asset purchases by €20 billion. is this the first step towards the end of these purchases? in december 2016 we decided to move from a monthly volume of €80 billion to a monthly volume of €60 billion, and to extend the programme for a further nine months until december 2017. the ecb governing council considered two options and concluded that both options – continuing for six months with a volume of €80 billion, or for nine months with a volume of €60 billion – would have a broadly equivalent impact on the economy. overall, we considered that our presence in the market would ensure a more lasting transmission of our stimulus measures. this adjustment does not signal the start of a gradual reduction of purchases ( tapering ). 1 / 3 bis central bankers'speeches the programme is experiencing some distortions regarding the capital key. is that sustainable? the purchase volume depends on each country ’ s percentage contribution to the ecb ’ s capital. temporary deviations can occur, but the capital key remains the criterion for allocating our purchases, and we will comply with it. we have always shown that, whenever it is necessary to act, we do so. in this context, in december we changed the maturity restriction regarding the securities that we could purchase. the aim is to continue the purchases until the end of the year, and we have no doubt that we will be able to achieve this. does this mean that other conditions will be changed? that ’ s not our intention, but the governing council could do so at any time. have we seen the upper limit of expansionary monetary policy? the governing council reiterated at its last meeting that “ we continue to expect rates to remain at present or lower levels for an extended period of time and well past the horizon of our net asset purchases ” and that, if necessary, “ we stand ready to increase our asset purchase programme in terms of size and / or duration ”. so we still have the option to be more expansionary, but currently the probability of us having to provide more monetary accommodation to meet our objective has reduced considerably. what stage has europe reached in the process of banking union? we are just over half - way along the path to banking union. there is a need to distinguish between the area of regulation and supervision, where we have made great progress, and the field of crisis resolution, i. e. what to do when a bank fails, where much remains to be done