##ubhaar also highlighted the fundamental importance of education in the digital age in a recent op - ed piece he wrote for a german daily newspaper : “ a good education system may be expensive, ” he conceded, but in the long run, he continued, one thing is even costlier, and that ’ s a bad education system. 10 4 impact on inflation ladies and gentlemen, as a central bank, we are interested in more than just the ramifications of digitalisation for the real economy. another aspect, and one that is of particular importance, is its impact on price developments – keeping prices stable is, after all, our primary objective as monetary policymakers. digital transformation impacts on inflation through multiple channels. one of them is the way technological progress pushes up productivity, driving down production costs. prices ought to follow costs downwards, assuming there is sufficient competition. 4 / 8 bis central bankers'speeches another is the shift in sales channels. it is becoming increasingly common to buy goods online rather in the local shop. as recently as in the year 2000, online trade accounted for a nearinvisible 0. 3 % of retail sales. by last year, that figure had already climbed to just under 10 %. this can invigorate competition – after all, online marketplaces are where you will find providers from every corner of the world. at the same time, price comparison websites let consumers scan the entire market in just a matter of clicks, creating very high levels of price transparency. even if there are some who only look for information online and still end up shopping locally, the increased transparency nonetheless intensifies the competition and squeezes margins and prices. my us counterpart jerome powell spoke in his testimony to the senate banking committee about the “ amazon effect story ”. 11 a study by the ecb concludes that the increasing use of online trade in the eu has reduced non - energy industrial goods inflation by 0. 1 of a percentage point each year since 2003. 12 there is another phenomenon which could have the opposite effect : the rise of dominant “ superstar firms ”. for the most part, these firms offer information - based goods which are sold online. it is a business model that involves substantial fixed costs but barely any variable costs. just take the video - on - demand platforms – whether they have a large or a small customer base has little bearing on their overall costs. increasing returns to scale are also being generated in the social media or by peer - to - peer ridesharing or

lowinterest - rate environment. as things stand, this is particularly the case in the corporate bond and syndicated loan segment. 2. as for banks ’ ability to bear risks, the picture is less clear. german banks today are better capitalised than they were just a few years ago, but their profitability remains weak. 3. this is why the financial stability review takes a particularly close look at the situation in the housing market – after all, this sector has often been the primary source of critical developments in the past. mortgage lending in germany is not a highly procyclical phenomenon. this is to be welcomed, since it dampens the risk of overvaluation from this side. yet banks are structurally vulnerable to changes in bis central bankers ’ speeches prices, so we will continue to keep a very close eye on developments in the real estate markets. 4. the banking union helps to better identify risks and to force the private sector to absorb a share of losses. a key component – from a financial stability angle – is the single resolution mechanism. in future, private sector owners and creditors are to be forced to shoulder the cost of restructuring or resolving banks. 5. but the banking union alone will be unable to loosen the sovereign - bank nexus because sovereign exposures continue to enjoy privileged regulatory treatment. this preferential treatment therefore needs to be brought to an end over a medium to long - term horizon. the financial crisis swept away any lingering doubts that the close financial ties between banks and sovereigns can pose a threat to financial stability. this is another area, then, in which we should not create any misguided incentives to take on excessive risk. i would like now to outline these findings in greater detail. 3. german equity and bond markets risk premiums on corporate bonds are currently very narrow. at times in 2014, risk premiums for non - investment grade paper in the euro area were no more than just under 300 basis points. so they came very close to the lowest levels seen in the pre - crisis era. we used these spreads to calculate implied default rates, which are lower than the historical norm. this suggests that risk is being underestimated – all the more so when one considers the frail state of the economy. broadly speaking, we see signs that enterprises are increasingly sourcing debt capital from outside the banking sector. this might be a sensible response to ongoing structural adjustments in the banking sector. but raising debt capital can pose a fresh set of risks because more capital makes