a limited time horizon. in the us commercial property sector, developments have lagged those in the residential property market, both with regard to prices and activity. the recent steep fall in prices raises risks both for banks and other financial institutions that are directly exposed to the commercial property market and for investors in us commercial mortgage - backed securities. the outlook for us corporate sector has stabilised since may 2009, as quarter - on - quarter profit growth has turned positive in the first half of 2009. this has mainly been due to a turnaround in the profitability of domestic financial industries ( see chart 2 ). as a consequence, corporate sector default rates are expected to peak. notwithstanding the improvement in total corporate profitability, there are risks : the increase in non - financial corporate profitability has been largely due to cost - cutting measures, which could not continue indefinitely, while weak demand prospects are expected to constrain revenue growth. the macroeconomic outlook in the non - euro area eu countries has improved, although there is still an unusually high degree of uncertainty. in many of the central and eastern european ( cee ) countries of the eu, vulnerabilities have been reduced since may, but the economic and financial situation remains fragile. in particular, further economic contraction is forecast for a number of these countries next year. in this environment, a combination of rising unemployment and falling household incomes could be expected to raise the credit risks on consumer loans and residential mortgages. corporate default rates are likely to be high in such a context as well. given these fragilities, the possibility of a resurfacing of risk aversion towards the region can not be excluded. in several cee economies, vulnerabilities stem from the fact that a sizeable proportion of outstanding bank loans are denominated in currencies other than the currency in which the borrower ’ s income is denominated. such mismatched foreign exchange currency positions mostly affect households. in countries with flexible exchange rates, currency depreciations earlier this year have meant that households would have to repay larger amounts than they expected. recent developments serve to underline the risks that exist when large stocks of foreign currency credit are outstanding. the share of foreign currency lending in many of these countries has been rising, owing to wide interest rate differentials. this has left them increasingly vulnerable to a renewed weakening of their currencies, which could trigger a significant further deterioration in banks ’ asset quality. the general recovery of risk

meeting of shareholders : “ corruption, criminal activity and tax evasion not only undermine the community but also distort the behaviour of economic agents and market prices, reduce the effectiveness of government action, increase the tax burden on those who do their duty, and restrict productive investment and job creation. well - functioning public administration improves the operation of markets and competition, reduces firms ’ costs, and is reflected in the quality and cost of public services and thus on the tax burden. the efficacy of the reforms depends on it. ” 22. these policy actions should not be eluded. for them to be effective, they must be seen as a part of a fully - fledged strategic reasoning on the prospective functioning of our economies. more generally, while we try to better understand the challenges posed by structural and technological change, there are questions that it is fundamental to address. among them : how should the education system adapt to enable the teaching of those skills essential to keep up with new technologies? how can we enable displaced workers to acquire skills which will not become, or are less likely to become, redundant through computerisation? how can public policy smooth the social impact of technological progress and allow a wider distribution of its fruits? bis central bankers ’ speeches