a rational reaction for many households. in the euro area, household deposits account for one fifth of banks ’ liabilities on average. thus, a large withdrawal of retail deposits could be very problematic for banks, as they could become underfunded and more dependent on less stable financing. hence, banks have a strong interest in keeping retail deposit rates positive, even when other funding costs drop : in practice there is a zero lower bound for retail rates, so when policy rates become negative, the cost of part of the bank ’ s funding does not go down. however, after the drop in policy rates, interest revenues on assets do decrease : variable rate loans adjust to market rates, and the maturing portfolio will be replaced with assets yielding less. thus, banks ’ net interest income starts to fall. of course, banks can try to limit the impact on profitability, by taking on more risk, or getting cheaper, but less stable, funding. however, this could make them more fragile. to limit the fall in their interest income, banks could reduce lending rates to a lesser degree than with a “ normal ” interest rate reduction. of course, this would hamper the monetary transmission to the real economy. that is the opposite of what we want. fortunately, this is not the whole story, as other channels can offset this adverse impact of negative rates. when policy rates are lowered, fixed - rate marketable assets held by banks gain in value. this boosts banks ’ economic capital at the moment of the rate cut. banks also benefit from the improvement in the economy that follows the rate cut : the quality of the lending book improves, borrower risk goes down, and the demand for loans increases. in addition, variable rate loans become more affordable after a rate cut. while this reduces banks ’ interest income, it also makes repayments cheaper and should lower default rates. banks ’ characteristics matter thus, the ultimate impact of negative rates on bank profits and credit supply is difficult to estimate. not all banks would be affected to the same extent by the negative rates. the impact of negative rates on banks ’ profits will depend on the composition of their balance sheets and, more generally, on their business model. the channels through which profitability is affected – the share of retail deposits, scope for valuation gains and maturity of the loan book – can provide an indication of the direction and the extent of the effect on each bank. 3 / 5 bis central bankers'speeches the lower bound in the remuneration

the government to deregulate industries. the more intense focus on the removal of unnecessary government regulation started more than twenty years ago, during the administration of president ford, and gathered momentum during the carter years. deregulation has altered the business landscape by allowing – indeed forcing – businesses to focus more clearly on a more competitive marketplace with fewer constraints and increased flexibility. again, as with macroeconomic policy, a policy of deregulating industry cannot create greater potential growth, but it can create the conditions under which such growth might occur. a third way in which the government and the private sector together have assisted the process of technology adoption is by fostering a highly flexible system of education and training that focuses on both theoretical and practical skills. in part because of the rapid changes in technology, today's students and workers no longer expect to keep a job for life, and they are keenly aware that, throughout their careers, new skills will be required for advancement. employers, too, recognize the value added by developing human capital to complement their fixed capital. thus, the united states has experienced a demand for educational services catering to participants at various stages in life. the demand for skill development and upgrading has been met in a number of ways – through on - the - job training, at so - called corporate universities, and in a range of public and private institutions of higher learning. surveys conducted by the u. s. department of education show that participation in adult education programs expanded over the past decade, with 46 percent of all adults reportedly having been engaged in an adult education program in 1998 - 99. in part because much of the training is work - related, the rates of participation are positively related to formal educational attainment. the trend toward lifetime learning also shows through in the enrollment statistics for higher education. today, more than 20 percent of the students in u. s. institutions of higher education are age 35 or older, up from less than 15 percent in 1985. in part, this increase has been fueled by the rising number of part - time students and of enrollees at two - year colleges. the latter group of schools, in particular, has lowered the cost of education for working students with night and weekend courses and with the development of contracts with employers to provide skill training. another way to meet the needs for skill training in coming years will involve distance learning. in 1995, one - third of u. s. institutions of higher education reported some use of distance education – two - way or one