my central message is that the core principles of risk management remain just that - - core principles. the improved techniques that the new technologies provide can improve matters only if they remain rooted in these core principles. in this context, i am reminded of the old back - to - the - future theme in science fiction in which an individual travels back in time and, by his presence, nearly alters history to his or our disadvantage. in dealing with the complex, fast - paced, and highly competitive businesses of today, many institutions may face a similar risk. institutions have the ability, as a result of available technology and financial innovation, to change their activities and risk profiles quickly, but they may not always employ the controls necessary to prevent unexpected and untoward results. many firms have already eliminated lower - and middle - management positions in response to competitive pressures. though such actions probably improved the cost - efficiency ratios of banks and helped them meet earnings expectations, they also could, if not done carefully, increase the likelihood that new weaknesses will appear. that is to say, institutions must take a sufficiently long - term perspective in their decisionmaking and not pursue purely short - term remedies to high operating costs. banking is a highly leveraged and, in many respects, low - margin business. losses from a single bad loan or a material breakdown in controls can eliminate the gain on many other transactions. the continued ability to identify and manage risks and to maintain the proper internal controls is critical in banking organizations even as they seek to increase profits and profitability. indeed, the acceptance and the application of the current innovations in risk - management techniques are going to require expense and some dramatic changes in the way most large banking organizations do business. many banks, i am afraid, are falling below the curve, perhaps on the basis of short - run cost - benefit analysis. in my view, failure to make these outlays and changes now will put at risk these banks'long - run profitability as financial transactions grow increasingly complex. the thrust of basel ii and, independently, our supervisory approach will disadvantage entities that do not prepare themselves by adopting these innovative techniques to handle the ever more complex financial transactions. new technologies and techniques must be adopted if financial institutions are to avoid repeating problems and if the banking system is to be as successful in accepting risk in the future as it has been in the past. important experiences over the past thirty years, the banking industry has faced many challenges. in the 1970s, large banks here and abroad

just described above take on even greater importance when they are framed in the context of the transition to a new demographic paradigm characterised by population ageing which, although present in many western economies, has a particularly strong impact on spain. the ageing challenge indeed, the combination of a low birth rate, high longevity and the impending retirement of the generation known as the baby boomers makes spain one of the countries where the dependency ratio, which measures the proportion of persons at least 65 years of age to those aged from 16 to 64, is increasing most sharply. specifically, according to the latest projections by the spanish national statistics institute, the dependency ratio will grow from 29. 9 % in 2019 to 51. 8 % in 2050, i. e. it will practically double in three decades. this increase in the spanish dependency ratio amply exceeds that projected for the european union as a whole, where it will rise by a factor of 1. 6 in the same period, according to eurostat. this change in the age composition of the spanish population will affect a very wide range of economic factors. the most obvious is perhaps the challenge it represents to spain ’ s welfare state. the increasingly higher proportion of older people puts upward pressure on the expenditure of the pension, health and dependency system, which poses a challenge to its financial sustainability that must be faced soon. see the 2014 report entitled erac peer review of the spanish research and innovation system, commissioned by the european commission. 16 / 18 but the issues associated with population ageing are not limited just to the public expenditure of the welfare state. their implications encompass many more facets of the economic arena and range from the potential growth of the economy to the management of economic policy. firstly, i would like to point out the close connection between population ageing and the long - term growth of the economy. as we have seen, the latter is affected by changes in employment and in productivity, which in turn is inextricably linked to technical progress. thus, it is important to extend people ’ s working life to stop the employment rate from falling and thus sustain spain ’ s capacity for long - term growth. however, there is evidence that older workers have fewer of the skills required to use new technologies because of their lesser human capital endowment, which moreover becomes depleted over time. hence an older population may also pose difficulties for productivity growth because the digital technologies tend to complement each other better with less technologically challenged workers, who are usually younger. 15 moving on