s the least efficient. german banks have a cost - income ratio of 73 %, which is much higher than that of the rest of the euro area. and while other countries have cut the number of banks by almost a quarter following the financial and economic crisis in order to reduce overcapacity, the corresponding figure for germany was only 10 %. 4 traditional business models under review the current low interest rate environment has not just revealed weaknesses among banks, it has also called into question the traditional business models of insurance companies and pension funds. 3 / 5 bis central bankers'speeches for many insurers in germany, guaranteed returns have become an issue. in the current market environment, it is becoming increasingly difficult to achieve the guaranteed interest rates of 4 % that were commonplace in contracts concluded in the mid - 1990s. the german ministry of finance has reduced the guaranteed interest rate for the current year from 1. 25 % to 0. 9 %. many insurance companies are now increasingly turning to unit - linked products. in addition, new regulatory requirements are increasing the demand for safe assets. german government bonds alone are yielding negative returns on maturities of up to seven years. against this backdrop, discussions are under way as to what can be done to counter this shortage of safe assets. one suggestion is that market participants create a new kind of safe asset, known as european safe bonds ( esbies ) 5, consisting of the senior tranche of a portfolio of existing bonds from different euro area countries. the advantage here would be that no joint liability would exist, as is the case in other proposals of this kind. from a purely academic perspective, this is certainly an interesting idea. but it would be difficult to counter the public ’ s assumption that this would be a surreptitious mutualisation of sovereign debt. the political desire to introduce esbies in the near future is likely to be very limited. i therefore don ’ t see this proposal as being part of the operational agenda but rather as a subject for long - term study. outlook let me conclude. weakening global growth and a generally lower natural interest rate are demanding very low, sometimes negative, market rates so that investment and consumption become more attractive. in the medium term we are thereby aiming to get inflation back to a level in line with our mandate to ensure price stability of below, but close to, 2 %. without our measures, the euro area economy would probably have slipped back into recession, with the risk of fully fledged deflation. we had

natural interest rate, i. e. the real rate of interest in which savings and investments are in equilibrium in an economy operating at its potential, where there is neither upward nor downward pressure on inflation. in the current environment, the ecb has brought the market rate below the level of the natural rate. the key rate since march last year has been at zero and the rate on the deposit facility at – 0. 4 %. had we not done this, constant nominal interest rates amid falling inflation rates would have led to higher real interest rates and undermined anaemic growth even more. this would have significantly increased the risk of deflation. this is just as harmful as accelerating inflation. as walter eucken said : “ deflation distorts the price framework just as much. ” 1 1 / 5 bis central bankers'speeches thus, price stability for the ecb means that we have to protect european citizens not only from inflation rates that are too high, but also from a deflationary spiral. this is reflected in our quantitative definition of price stability : an inflation rate of below, but close to, 2 % in the medium term. we therefore acted in order to abide by this symmetrical mandate on price stability. but we are aware that we cannot lower our interest rates to an unlimited extent. 2 as from a certain level, it becomes more attractive to keep cash – despite the associated costs – than to pay negative interest rates. and even if this point has not yet been reached, we are bearing in mind that further rate cuts into negative territory may have non - linear effects. the reactions of people in extremis cannot be anticipated. but we can also influence market interest rates in other ways. thus, for example, with our asset purchases we have pushed the yield curve down. and by offering targeted longer - term refinancing on favourable terms which reward additional lending, we have made it possible for banks to cut their interest rates, a move which has led to increased lending. all these measures in recent years have contributed to the economic recovery in the euro area. thus, both the demand for, and supply of, credit is rising. in the real economy, too, positive surprises have predominated recently. the growth rate in the fourth quarter of last year rose to 0. 5 %. in the euro area, the seasonally adjusted unemployment rate fell to 9. 6 % in december. in november it was 0. 1 percentage point higher and in december of the