of strong supervision for monetary policy all these supervisory efforts have not only produced a more robust banking sector ; they have also provided crucial support for our monetary policy since we entered a new easing phase in mid - 2014. this support has come from two main sources. first, stronger supervision has improved the transmission of our policy impulses through banks. there is now plenty of evidence to suggest that the level of bank capital is a key variable in how banks lend during downturns, and hence also for monetary policy transmission. 1 see, for example : buch, c. m. and prieto, e. ( 2014 ), “ do better capitalized banks lend less? long - run panel evidence from germany ”, international finance, vol. 17 ( 1 ), pp. 1 - 23 ; kapan, t. and minoiu, c. ( 2013 ), “ balance sheet strength and bank lending during the global financial crisis ”, discussion papers, no 33, deutsche bundesbank ; and osborne, m., fuertes, a. m. and milne, a. ( 2017 ), “ in good times and in bad : bank capital ratios and lending rates ”, international review of financial analysis, vol. 51, may, pp. 102 – 112. it is therefore no surprise that the improved health of the banking sector, coupled with our credit easing measures, has coincided with a marked improvement in the transmission process. previous asymmetries in bank lending rates across the euro area have now largely been reversed, the cost of bank borrowing has stabilised at record lows everywhere in the euro area, and so has its dispersion across countries. we can now say that the pass - through from our past policy measures to lending rates is nearing completion. the decline in lending rates has been particularly noticeable for small loans in vulnerable 2 / 4 bis central bankers'speeches countries, which are a proxy for the financing conditions faced by smes. smes are of course highly dependent on well - functioning banks as their options are limited when it comes to accessing market finance. for these small loans, the spread between vulnerable and more resilient countries has now narrowed to a record low of 5 basis points. this more even credit pricing across countries and firms has, in turn, been crucial to the broadening of the economic and employment recovery, not least because smes represent 60 % of euro area value added and employ 70 % of the labour force. the second way in

of banks strengthened where needed. however, considerable progress has been made since last summer in improving the funding situation of banks, in strengthening the domestic deposit base in stressed countries and in reducing reliance on the eurosystem as reflected in repayments of the three - year ltros. further decisive steps for establishing a banking union will help to accomplish this objective. in particular, in the light of recent experience, we must emphasise that the future single supervisory mechanism and a single resolution mechanism are crucial elements for moving towards re - integrating the banking system and therefore require swift implementation. to sum up, taking into account today ’ s decision, the economic analysis indicates that price developments should remain in line with price stability over the medium term. a cross - check with the signals from the monetary analysis confirms this picture. as regards fiscal policies, euro area countries should build on their efforts to reduce government budget deficits and continue to implement structural reforms, thereby mutually reinforcing fiscal sustainability and economic growth. fiscal policy strategies need to be complemented by growth - enhancing structural reforms. such reforms should be ambitious and broad - ranging, encompassing product markets, including network industries, labour markets and the modernisation of public administration. to support employment, wagesetting should become more flexible and better aligned with productivity. these reforms will help countries in their efforts to regain competitiveness, set the foundations for sustainable growth and support the return of macroeconomic confidence. we are now at your disposal for questions. bis central bankers ’ speeches