non - financial private sectors in some countries. fourth, liquidity risk is increasing in the rapidly growing investment fund sector, with potential spillovers to the broader financial system. beyond systemic risks at the aggregate euro area level, we are also closely monitoring risks arising at the country and sectoral levels. targeted macroprudential policy measures are the appropriate policy instruments to address these country or sector - specific risks. as you know, responsibility for decisions on macroprudential measures in the euro area is shared between national authorities and the ecb. this means that we can top up the macroprudential measures taken by national authorities for those instruments that are envisaged in eu legislation. the ecb strengthened its role in macroprudential policy in 2016 and also took action to improve transparency – the governing council published its first macroprudential statement in december 2016. 3 besides the risks in some countries ’ real estate sectors, we noted that cyclical systemic risks in the euro area remained contained and, therefore, a broad - based increase in countercyclical capital buffers in the euro area was not warranted. this view was in line with the decisions of the national authorities, with whom we enjoyed excellent cooperation over the past year. transparency in the macroprudential policy domain was also enhanced by the launch of the new biannual ecb macroprudential bulletin in march 2016. our 2016 annual report also focuses on the actions necessary to overcome the legacy of the crisis in the banking sector. decisive action is needed at the sectoral, national and european levels. first, banks need to continue adjusting their business models to better cope with the low interest rate environment. as we show in a dedicated analysis contained in the report, the optimal strategy is likely to depend on each bank ’ s core characteristics. 4adjustments may include crossborder mergers and acquisitions where they allow efficiency gains. second, significant effort is needed to solve the problem of non - performing loans ( npls ). the extent and macroprudential nature of the problem calls for a comprehensive and coordinated response at eu level. while actions should be taken by stakeholders at the national level, these should be harmonised in a european blueprint for asset management companies ( amcs ), among the strategies to reduce the stock of npls on banks ’ balance sheets. the issue is also being addressed as a matter of priority from a microprudential perspective. 5 further enhancing the european financial framework turning now to

months on, in part thanks to the measures that we took at that time 2 ( and disproving the policy sceptics ), macroeconomic conditions have improved and the euro area has been a major source of positive news. fears of deflation have receded. despite a still weak international backdrop, gdp grew at a solid rate of 1. 7 % in 2016 and in the first quarter of 2017, economic sentiment climbed to the highest levels since 2011. unemployment is at its lowest point since may 2009. over four and a half million more people are now employed than was the case three years ago. our measures have also reduced fragmentation among member states : the 1 / 5 bis central bankers'speeches dispersion of both gdp growth and inflation rates is at the lowest level since the beginning of the monetary union. looking back, we can see how the measures that we took in march 2016 have effectively fed through to the broader economy, adding to the substantial monetary stimulus already in place at the time. they have built a new cushion that helped to firm up the recovery and make it more resilient to external shocks and uncertainties. in december 2016 we decided to extend our asset purchases until december 2017, though at a reduced pace of €60 billion per month from april 2017 onwards, in line with the diminished risks to price stability. this safeguards the financing conditions that are still necessary to foster a return of inflation rates towards levels below, but close to, 2 % over the medium term. the measures the ecb took in march 2016 have supported the improvement in financing conditions. they have facilitated the continued fall in composite bank lending rates for loans to non - financial firms and for housing loans. both have fallen to historically low levels. overall, since may 2014, i. e. immediately before our decision on a combination of measures to provide additional monetary policy accommodation and to support lending to the real economy, the decline in bank lending rates has amounted to almost 120 basis points for loans to firms, and around 110 basis points for housing loans. likewise, lending volumes have increased considerably as growth in loans to firms recovered to 2. 0 % in february 2017, from 2. 9 % in may 2014, and for households to 2. 3 % from – 0. 1 % over the same period. small and medium - sized enterprises, the backbone of the euro area economy, have greatly benefited : their access to financing has significantly improved and their borrowing costs have dropped by around 40 basis points since march 2016 and