balance sheets. the ecb is aware that some of the positive effects of our policy on banks ’ profitability will wane with time. however, low or negative interest rates cannot be blamed for low profitability per se. with lower interest rates, ( - 0. 50 % and - 1. 25 % for the repo rate and deposit rate, respectively ) which have been in negative territory almost for two years now, swedish banks, for example, have been able to sustain roe levels of close to 12 %. there are several explanations for this difference but a sizeable contribution comes from cost control stemming from adjusted business models. in fact, cost per banks total asset is at 0. 92 for swedish banks against 1. 42 for the euro area, on average. this clearly shows that european banks have to adjust their business models to improve their profitability prospects. however, to face bank profitability challenges, the euro area needs to develop and implement a joint strategy, over a determined period of time, to overcome excessive non - performing loans and / or excessive banking capacity in some jurisdictions. we need a stronger banking sector which is essential to better transmit monetary policy impulses and support the economic recovery. in this, as in other domains, europe must endeavour to work together to face a more challenging world that threatens european values of open and tolerant societies. thank you for your attention. 4 / 4 bis central bankers'speeches

these have significantly improved financial conditions, reduced financial fragmentation and fostered economic activity and inflation. in the first half of 2016, the euro area grew at an annualised rate of 1. 7 %, similar to last year ’ s growth rate. this figure is far from impressive, especially considering that the euro area is in the early phase of a recovery, after the second recession in 2012 and 2013. on the other hand, the unemployment rate, albeit falling, still remains above 10 %, amid a continuous increase in the participation rate in the labour force since the crisis. one positive aspect is that our policies have contributed to a decrease in financial fragmentation and that the dispersion of gdp growth and inflation across euro area countries is at the lowest level since the beginning of monetary union in 1999. another positive note is that the recent growth was largely driven by domestic demand. moreover, the recovery has proved resilient to a series of adverse shocks over the past year : the slowdown in china last summer, the acute stock market turbulence in the early part of this year and, most recently, the uncertainty created by the u. k. referendum. this resilience reflects, to a large degree, the amount of monetary expansion – actual and expected – that is embedded in financial prices. indeed, with the five packages of measures adopted since june 2014, we have been able to : reduce the cost of capital, produce rebalancing effects in broader asset markets, improve credit supply conditions and restore credit volume growth since the latter part of 2014, after two years of negative developments. in the latest move in march 2016, a powerful set of measures was taken, comprising an increase in the asset purchase programme, its extension to corporate bonds and the introduction of a new mediumterm liquidity facility with interest rates that can go as low as our negative deposit facility rate, contingent on the banks reaching a credit growth benchmark. yields on bank and non - financial bonds have eased in response to the measures taken, testifying to the effectiveness of the current monetary policy. funding conditions for banks improved as wholesale money market rates turned negative and as banks received direct support from new liquidity facilities with four - year maturities and low rates ( tltro - i and ii ). these developments have stimulated the pass - through of this funding cost relief to borrowing costs for both firms and households. 2 / 4 bis central bankers'speeches as a consequence, bank lending rates to non - financial corporations ( nfcs )