it are not self - evident. this means that institutions cannot expect their problems to decrease in the future. rather, they must act now – if not yesterday – before an economic downturn sets in, even if there are, fortunately, no signs of that at the moment. the second challenge i would like to talk about is demographic change, which is increasingly making itself felt. the ratio of employed persons to non - employed persons is declining steadily – germany ’ s figures are particularly poor. nor is there currently much prospect of improvement, since birth rates are very low in our country. for banks ’ business models, this entails enormously demanding medium to long - term changes : a dwindling population, smaller economic growth overall, a higher savings rate and less investment and consumption. the change in investment opportunities and customer expectations will confront german financial institutions with completely new questions and problems. even today, the sector is facing strong headwinds from the third major challenge – the lowinterest - rate environment – which is eroding the profitability of interest - focused business models. this challenge is very serious for german institutions, given their rates - driven business models. we can illustrate this challenge with just one simple figure : net interest income currently makes up around 75 % of the operating profit of german banks. a persistent low - interest - rate environment means that a basic component of their business model no longer works : it means, quite simply, that it is no longer possible to earn enough money by focusing on maturity transformation. 3 / 6 bis central bankers'speeches for many years, institutions used the very favourable financial market conditions and their deposit holdings in order to cross - finance their customer services. they were able to offer current accounts free of charge because earnings could be made on the financial market using the money in the accounts. this is likely to be significantly harder in future, since – in all probability – the interest rate level will remain low for a long time. 2 this means that institutions can no longer support their business models with earnings from financial market refinancing, since earnings from maturity transformation will not be sufficient. this requires enormous rethinking. the fourth challenge is digitalisation. although this is by no means new, 3 it has now developed into a broad mass phenomenon which is making ever - greater inroads into our everyday lives – which means it is also increasingly entering the financial sector. why is this such a massive challenge for the business models of banks and savings banks?

charles bean : the economic outlook remarks by mr charles bean, deputy governor of the bank of england, at the national farmers ’ union conference, birmingham, 16 february 2009. * * * the weather is at the forefront of farmers ’ minds but rarely crosses that of a central banker except when, as two weeks ago, a dump of snow brings london to a standstill. but economists ’ lack of interest in the weather was not always the case. william stanley jevons, one of the great victorian economists, thought sunspot activity was the key to understanding economic cycles. sunspots affected the weather, which in turn determined crop yields, demand and output in what was still a largely rural economy. no one takes this theory of cycles literally. but it is a useful metaphor for the way unforeseen shocks can switch an economy from one path to another. today, the global and british economies have suffered such a shock, though one that is man - made in origin rather than extra - terrestrial. the origins of the crisis lie in the balmy economic weather prevailing in the decade or so before mid - 2007. growth was steady and inflation low and stable in the united kingdom and other advanced economies, while rapid development in china, india and other emerging market economies was lifting millions out of poverty. economic stability boosted confidence and encouraged an expansion of credit. moreover, high levels of savings in some asian economies, coupled with loose us monetary policy, drove global real interest rates unusually low. this mix of exaggerated confidence and low real interest rates encouraged investors into riskier assets and banks into riskier lending, epitomised by the us sub - prime housing market. that was compounded by a lack of incentive for care in extending loans, if they were then packaged up and sold on to others. in august 2007, the economic weather turned distinctly autumnal. falling us house prices and rising sub - prime defaults led to nervousness about the value of assets backed by those mortgages. moreover, losses associated with sub - prime loans began appearing in places noone had anticipated, revealing how opaque many financial instruments were. the markets for these assets closed and their prices plummeted, putting pressure on the balance sheets of the financial institutions holding them, while wholesale funding dried up. and the wide dispersal of the suspect assets meant these balance sheet pressures were quickly transmitted internationally. in the united kingdom, banks became increasingly cautious in lending, adding to downward pressure on housing and commercial property prices, and slowing growth