, while there are no signs yet of a convincing upward trend in underlying inflation. looking ahead, on the basis of current oil futures prices, headline inflation rates are likely to pick up significantly further at the turn of the year, mainly owing to base effects in the annual rate of change of energy prices. supported by our monetary policy measures, the expected economic recovery and the corresponding gradual absorption of slack, inflation rates should increase further in 2018 and 2019. this pattern is also reflected in the december 2016 eurosystem staff macroeconomic projections for the euro area, which foresee annual hicp inflation at 0. 2 % in 2016, 1. 3 % in 2017, 1. 5 % in 2018 and 1. 7 % in 2019. by comparison with the september 2016 ecb staff macroeconomic projections, the outlook for headline hicp inflation is broadly unchanged. turning to the monetary analysis, broad money ( m3 ) growth moderated in october 2016, with its annual rate of growth decreasing to 4. 4 %, after 5. 1 % in september. as in previous months, annual growth in m3 was mainly supported by its most liquid components, with the narrow monetary aggregate m1 expanding at an annual rate of 7. 9 % in october, after 8. 4 % in september. loan dynamics followed the path of gradual recovery observed since the beginning of 2014. the annual rate of change of loans to non - financial corporations increased to 2. 1 % in october 2016, from 2. 0 % in the previous month. the annual growth rate of loans to households remained at 1. 8 %. although developments in bank credit continue to reflect the lagged relationship with the business cycle, credit risk and the ongoing adjustment of financial and non - financial sector balance sheets, the monetary policy measures put in place since june 2014 are significantly supporting borrowing conditions for firms and households and thereby credit flows across the euro area. to sum up, a cross - check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need to take today ’ s monetary policy decisions so as to preserve the very substantial amount of monetary support that is necessary in order to secure a return of inflation rates towards levels that are below, but close to, 2 % without undue delay. monetary policy is focused on maintaining price stability over the medium term and its accommodative stance supports economic activity. as emphasised repeatedly by the governing council, in order to reap the full benefits from our monetary policy measures, other policy

vitor constancio : challenges faced by the european banking sector speech by mr vitor constancio, vice - president of the european central bank, at the risk & supervision 2017 conference, organised by the italian banking association ( associazione bancaria italiana ), rome, 14 june 2017. * * * let me start by thanking the italian banking association for inviting me to participate in this important event. euro area banks have faced a number of headwinds since the financial crisis. as a result, euro area banks have raised significant amounts of capital which have led to a substantial strengthening of solvency ratios : average common equity tier 1 capital ( cet1 ) increased from 7 % in 2007 to 14 % at present. the solvency position of european banks is thus robust. the lingering concerns about their condition relate primarily to their low profitability, an issue that has already lasted several years. the subdued profitability is reflected in depressed bank valuations. despite a broad - based improvement in bank valuations in recent quarters, a wide dispersion persists between euro area and u. s. banks ’ valuations. while euro area banks ’ price - to - book ratios have recovered from the lows of mid - 2016, the gap between euro area and u. s. banks ’ valuations remains significant, with an average price - to - book ratio of 0. 77 against 1. 26 for u. s. listed banks. the large cross - sectional variation of price - to - book ratios within the euro area partly reflects cyclical factors, as the pace of economic recovery varies across countries, but possibly also differences in the progress made by institutions in tackling structural challenges. to give you an idea, average price - to - book - value is 0. 94 for spain, 0. 75 for italy, 0. 76 for france and 0. 42 for germany. in the euro area, listed banks aggregate return on equity ( roe ) stood below 3 % in 2016, a slight decline from the previous year. in international comparison, euro area banks ’ financial performance continues to lag behind that of most of their global peers : in 2016, u. s. average roe stood at 8 % with nordic banks above 9 %, led by swedish banks with 12 % roe, a notable performance in a country where key official interest rates are negative and much lower than in the euro area. regarding cross - country differences, listed italian and german banks recorded negative average roe in 2016