That marks a 50% reduction from the 2011 peak. Against this backdrop, banks should persist in their management efforts to enhance the quality of their balance sheets, which is a fundamental factor for the recovery of profitability in the medium term. The other lever in banks’ hands is to improve their efficiency, through a more appropriate management of their costs that does not limit their capacity to adapt to an increasingly more technified environment. In this respect, we should note that, in business in Spain, the 4/10  efficiency ratio at the individual level, without taking into account severance payments, has increased (worsened) by somewhat over 9 pp since 2014, to 58.8%. As to the composition of operating expenses, the weight of personnel costs has diminished, and that of IT and communications, outsourced services and amortisation has increased, reflecting to some extent the ongoing digitalisation and technological change at banks. It should be borne in mind that operating expenses are one of the most significant levers over which banks have direct control to increase the profitability of their business. In any event, it should also be stressed that Spanish banks’ efficiency ratio at the consolidated level, calculated as the ratio of operating expenses to gross income, is one of the lowest (best) in Europe. The actual and projected reduction in the euro area economy’s rate of nominal growth and, as a consequence, the fact that interest rates are going to be at lower or even negative levels for longer, may ultimately affect financial institutions’ profitability.
The introduction of the euro has been a strong catalyst for mergers and acquisitions in the euro area. The European M & A market seems to be amongst the most dynamic in the world: with operations totalling over 1,000 billion euros in 1999, it is now catching up on the American market. The euro has brought about significant changes for participants in financial markets and has fostered structural developments in the financial industry. This is true both on euro-area money markets and on capital markets. From the beginning of Stage Three of EMU, cross-border transactions in the money market increased so as to represent more than 50% of the total activity in all segments of the money market. The unsecured deposit interbank market—which is mostly concentrated on shorter maturities—exhibits a  4  BIS Review 11/2001  very high degree of integration. The integration of interest-rate markets within the euro area is a key achievement which deserves to be underscored. EONIA and EURIBOR have provided the market with uniform benchmarks fully accepted by all market participants. The diagnosis is the same in the shortterm derivatives market, whose integration, standardisation and depth have increased. This is reflected, for instance, in the scale of daily transactions and the huge expansion of the euro interestrate swap market. These structural changes in the euro area money market have generated significant moves by market participants, who have concentrated their euro cash management activity and have benefited from better liquidity on the secondary market.