has increased as the economic outlook has worsened and the share of triple - b ratings has grown. concerning the second vulnerability, in several countries debt in the public and / or nonfinancial private sectors is lingering at levels that are high by historical and international standards. this leaves public and private finances exposed to the risk of a sudden change in market sentiment or deteriorating macroeconomic conditions. third, parts of the banking sector continue to exhibit weak performance. banks have improved their capital positions and profitability since the euro area crisis, and the stock of non - performing loans continues to decline at a moderate pace. but further improvements are needed in parts of the banking sector if banks are to achieve sustainable rates of return. in particular, overcapacity and cost inefficiencies weigh on many banks ’ long - term profitability prospects. the better performance of some banks within the euro area, and in jurisdictions facing similar economic and financial conditions, illustrates the importance of addressing structural issues. the current interest rate environment has various implications for the resilience of the banking sector. banks have benefited, and will continue to benefit, from the lower credit risk for borrowers, and from the higher asset valuations associated with lower interest rates and 1 / 2 bis central bankers'speeches better macroeconomic outcomes. this has helped support bank profitability across the euro area since the deposit facility rate turned negative in 2014. however, the negative interest rate policy also entails costs for banks, and these could increase the longer negative rates are in place, the lower policy rates are set and the larger the amount of excess liquidity held by banks. these vulnerabilities could crystallize if economic growth is much weaker than expected, or if weak growth persists for longer than expected. we thus welcome the measures taken by the banking sector in recent years to improve resilience, and support efforts to further strengthen resilience while conditions are benign. there are also vulnerabilities in the non - bank financial sector, which has significantly expanded its role in financing the real economy in the euro area. total assets held by nonbanks have almost doubled over the last ten years, growing from €23 trillion in 2008 to €42 trillion in 2018, while the size of the banking sector stagnated over this period. non - banks currently account for around 55 % of the euro area financial sector. while a larger non - bank financial sector has the benefit of helping to diversify the funding sources available to the

and here the ecb will continue to take all necessary steps within our mandate of price stability – for all euro area citizens in all parts of the euro area. already our policies have dispelled tail risks in financial markets that could have led to selfreinforcing vicious circles. we are now orienting our measures to ensure that the right financial conditions are in place to support a recovery from the crisis. this was the motivation behind our recent decision to expand our pandemic emergency purchase programme to €1. 35 trillion, coupled with the up to €3 trillion we are making available to banks that lend to the real economy. but monetary policy cannot address the more profound questions about how the economy will look in the future. historical experience suggests that major economic shifts like the one we are going through today require government action to foster change and smooth the transition to the new normal. in particular, governments need to foster innovation by providing the right framework to encourage experimentation and risk - taking in new and growing sectors, and to support the transition to new jobs for people working in “ sunset ” sectors. in parallel, they need to ensure that the conditions are in place to direct investment towards the technologies and sectors of the future. 2 / 4 bis central bankers'speeches this requires sufficient financing. the european commission estimates that the investment needs for delivering the digital transformation as well as the green transition will be at least €1. 2 trillion over the next two years. 2 but in a number of countries – italy among them – mobilising investment requires above all a business - friendly economic environment, with efficient and agile public and private services, adequate physical and digital infrastructures, a well - functioning judicial system and a strong financial sector. if such actions are taken, this crisis can engender a period of positive transformation. it offers an opportunity to policymakers to take a decisive step forward towards more inclusive, greener and more digital growth. a renewed focus on the digital economy, for example, can help break the negative feedback loop we see in europe between fragmented markets, low economies of scale and weak investment in digital capacities, which has at times resulted in the knowledge economy in the euro area contributing only about half as much to productivity growth as in the united states. 3 greater digitalisation would in turn help accelerate the shift in europe towards what the economist carlota perez has termed “ smart green growth ”, which is not only about renewables and sustainable goods, but also about innovation in the productivity of resources