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As a result, profitability stemming from the maturity transformation business may come under renewed pressure – not least as retail household deposits tend to be bound at zero. Furthermore, should downside risks to the economic outlook materialise, higher loan loss provisions may further compress bank profitability. Accommodative monetary policy has greatly supported bank profitability in past years. In fact, conventional and unconventional measures have improved the quality of credit overall, thereby 2/6  BIS central bankers' speeches  reducing provisioning needs. Our measures have also increased the demand for loans, which has more than offset the negative effect of compressed margins. Furthermore, structural factors are also weighing heavily on euro area banks’ profitability. In an environment where cyclical factors may exert further downward pressure on bank profitability, banks would need to step up their efforts to overcome structural challenges. Such measures may include cost reductions – including lower staffing costs and streamlining of branch networks, enhanced digitalisation – implying initial, one-off large-scale investments, revenue diversification and the reduction of the stock of non-performing loans in the six countries where levels are still high. A number of regulatory and policy measures could help to improve the institutional setting in which the banking sector operates and facilitate banks’ efforts to adjust their business models. Such measures should include completing the banking union (in particular the establishment of a European deposit insurance scheme), the subsequent removal of the remaining non-harmonised national options and discretions, and making progress with the capital markets union.