after a gradual winding - down of our net asset purchases. accordingly, at its last monetary policy meeting the governing council confirmed that it continues to expect the key ecb interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 % over the medium term. the governing council also decided to reduce the monthly pace of the net purchases under the asset purchase programme ( app ) to €15 billion from october until the end of december 2018 and anticipated that, subject to incoming data confirming our medium - term inflation outlook, net purchases will then end. finally, the governing council also confirmed its intention to reinvest the principal payments from maturing securities purchased under the app for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. significant monetary policy stimulus is still needed to support the further build - up of domestic price pressures and headline inflation developments over the medium term. this support will continue to be provided by the net asset purchases until the end of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by our enhanced forward guidance on the key ecb interest rates. in any event, the governing council stands ready to 1 / 3 bis central bankers'speeches adjust all of its instruments as appropriate to ensure that inflation continues to move towards the governing council ’ s inflation aim in a sustained manner. the financial health of the euro area banking sector has continued to improve. although showing a slight decrease from 14. 6 % at the end of 2017, the aggregate common equity tier 1 ratio of euro area significant institutions stood at 14. 1 % at the end of the first quarter of 2018. banks have made progress in reducing their stocks of non - performing loans ( npls ). in the first quarter of 2018, the npl ratio for euro area significant institutions dropped further, to 4. 8 %, compared with 5. 9 % a year earlier. however, euro area banks ’ profitability remains subdued. the average return on equity of euro area significant institutions declined to 6. 6 % in the first quarter of 2018, from 7. 1 % a year earlier. in this context, eu and national authorities are still following up on a comprehensive action plan for dealing with legacy asset quality issues

bank of new zealand bulletin ( volume 69, number 1 ). marvin goodfriend ( 2005 ) “ why a corporate bond market : growth and direct finance ” remarks made at the bis / pbc seminar on “ developing corporate bond markets in asia ” held in kumming, china, 17 - 18 november 2005. new zealand ’ s unique financial services it is thus instructive to assess the relative role that these financial products play in new zealand. doing so highlights just how unique – although not necessarily concerning – new zealand ’ s financial intermediation is in some respects. while the profile looks similar to australia, domestic credit 5 accounts for around 150 percent of gdp in nz, compared to 180 percent in australia, and our stock market capitalisation is less than half of theirs, relative to gdp. relative to most developed economies, banks play a very dominant role in new zealand ’ s intermediation process, with bank credit ( especially mortgage credit ) our preferred capital raising instrument. domestic bank credit is comparatively large relative to the size of the economy and our capital ( i. e., bond and equity ) markets ( see figure 1 ). figure 1 : channels of local currency funding source : rbnz, bank for international settlements in aggregate, banks own around 75 percent of new zealand ’ s total financial assets, with around 90 percent of these owned by the largest four banks. by contrast, funds under management account for less than 20 percent of financial system assets, and the non - bank financial sector accounts for only 7 percent. the registered banks operating in new zealand also have a relatively high reliance on foreign funding for their lending activities. the banking sector ’ s net foreign liabilities account for around 20 percent of new zealand ’ s total liabilities, which is very high by international standards. domestic credit consists of claims ( lending ) of m3 institutions on central government, and of m3 institutions and the reserve bank on the private sector. figure 2 : offshore funding of banks net banking sector non - resident liabilities / gross financial system liabilities source : oecd. bank profitability – financial statements of the banks. rbnz calculations new zealand has a very high level of foreign ownership by developed country standards, with more than 90 percent of the banking sector owned by foreigners. figure 3 : share of foreign bank assets in domestic banking systems source : world bank. foreign banks are banks with more than 50 percent foreign shareholding. similar to australia, a relatively high proportion of lending is to households, with