prerequisite for monetary policy to make its contribution towards supporting economic growth and job creation in the euro area. a very thorough analysis of all incoming data and developments over the period ahead is warranted. turning to fiscal policies, with financial market uncertainty remaining high, all governments need to take decisive and frontloaded action to bolster public confidence in the sustainability of government finances. all euro area governments need to show their inflexible determination to fully honour their own individual sovereign signature as a key element in ensuring financial stability in the euro area as a whole. countries under joint eu - imf adjustment programmes as well as those particularly vulnerable to financial market conditions need to unambiguously implement all announced measures for fiscal consolidation and the strengthening of domestic fiscal frameworks, and they need to stand ready to take any additional measures that may become necessary owing to the evolution of their situation. fiscal consolidation and structural reforms must go hand in hand to strengthen confidence, growth prospects and job creation. the governing council therefore urges all euro area governments to decisively and swiftly implement substantial and comprehensive structural reforms. this will help these countries to strengthen competitiveness, increase the flexibility of their economies and enhance their longer - term growth potential. in this respect, labour market reforms are key, with a focus on the removal of rigidities and the implementation of measures which enhance wage flexibility. in particular, we should see the elimination of automatic wage indexation clauses and a strengthening of firm - level agreements. more generally, in these demanding times, moderation is of the essence in terms of both profit margins and wages. these measures should be accompanied by structural reforms that increase competition in product markets, particularly in services – including the liberalisation of closed professions – and, where appropriate, the privatisation of services currently provided by the public sector, thereby facilitating productivity growth and supporting competitiveness. at the same time, the governing council urges all euro area governments to fully implement all aspects of the decisions they took on 21 july 2011. bis central bankers ’ speeches let me close with some personal remarks. this is my last press conference following a meeting of the governing council. i remember my first press conference, eight years ago, as if it were yesterday. i want to tell you that it has been a great pleasure to have this regular dialogue with the press, with all of you. we have, together, each of us with our different responsibilities, analysed the european and global situation throughout these years. we were never in calm waters.

##ally. this makes it harder for them to build up buffers against unexpected shocks and limits their capacity to fund loan growth. at the same time, banks with weak profitability prospects and low market valuations could find it very costly, or even prohibitively expensive, to raise capital from market sources should the need arise. in addition, banks with limited current earnings power may also be tempted to take on more risk. higher risk - taking by banks can cause financial imbalances to build up, should risks be correlated. in fact, in the banking sector, profitability which is ( too ) high may be as much of a problem as profitability which is ( too ) low, as it may be an indication of excessive risk - taking of the sort observed in the run - up to the global financial crisis. against this background, today i will focus my remarks on the main determinants of banks ’ profitability outlook. i will cover both cyclical and structural factors, as well as possible ways for banks to return to sustainable profitability. cyclical factors have helped improve bank profitability in recent years bank performance is closely linked to economic activity. in fact, bank profitability has improved in 1 / 4 bis central bankers'speeches the past few years on the back of continued economic growth, with euro area banks ’ roe reaching 6 % in 2018, up from 3 % two years earlier. cyclical factors have supported these profitability improvements via three channels. first, the broadening economic expansion, coupled with low interest rates, has made it easier for borrowers to repay their loans, leading to better credit quality and lower bank provisions. second, increased lending volumes have helped offset the negative impact of shrinking net interest margins. and third, a favourable macroeconomic environment has also supported npl work - outs and the reduction of risk premia, leading to higher npl sales, which have contributed to lower provisioning needs. in this context, it is important to recall that the overall effect of our monetary policy on bank profitability has so far been broadly neutral. nevertheless, the overall effects of negative rates on the banking sector need to be carefully monitored, particularly because the balance of their effects will depend on how long rates remain in negative territory. progress in tackling structural challenges has clearly been insufficient notwithstanding the weakening economic prospects, banks ’ profitability is mainly weighed down by structural factors. improving cost efficiency is one of their key challenges. cost efficiency, as measured by cost - to - asset and