##s on employment, output and the standard of living. while those sectors with low levels of employment are expected to grow as a share of the population, the working age population is expected to decline as a share of the total population. if there are no changes in employment patterns, these demographic trends will reduce the annual growth rate by about 1. 3 percent, every year. this is a strategic threat for the israeli economy and for israeli society – one that we must not ignore. even if labor force participation increases, it is vital that we create the conditions required for workers to be absorbed in industries typified by a high level of human capital as well. otherwise, employment growth will be able to make only a limited contribution to gdp growth, a reduction in poverty and an increase in the standard of living. the government has recognized the importance of integrating these population groups into the labor force and, in 2010, it adopted detailed employment targets to which the economy is supposed to converge in 2020. the target rates set for the arab population in 2020 – 41 percent employment for women and 78 percent for men – are ambitious but possible. at the same time, the rate of progress toward the goals thus far is not sufficient, and much more effort is required in order to meet them on time. the government made many important decisions that delineate a policy intended to help in achieving these goals. it is very important to continue implementing this policy, which is supposed to give the appropriate weight to the relevant issues in future budget priorities. among others, these include raising the level of education and skills relevant to the labor market, expanded early childhood care solutions, improved transit accessibility between places of residence and employment centers, methods for removing cultural obstacles to participation in the labor force, encouraging small businesses in the arab sector in various ways, encouraging the integration of workers from the arab sector who have the appropriate talents in industries typified by low rates from this population group, and combating discrimination. the arab population in israel contains immense untapped potential from the standpoint of the israeli economy ’ s growth capability. beyond the economic potential, the issue also contains highly significant social potential. the correct policy, and its correct implementation, will bear fruit both from the standpoint of the arab sector, increasing its integration in israeli society and improving its economic situation, and from the standpoint of the general population and the economy as a whole. our ability to continue existing as a society that is both multi - faceted and socially cohesive

not end with the publication of the basel ii text this past june. indeed, it cannot cease, because, as i mentioned, one of the committee ’ s underlying goals is to develop a framework that can adapt to future advances in risk management practices. supervisors are committed to monitoring and discussing these developments with the industry. the committee will make adjustments to the framework to reflect the state of risk measurement and management when necessary. i am pleased to say that the committee is already honouring this promise. one topic that we are studying carefully concerns the treatment of “ double default. ” some representatives of the industry believe that basel ii takes an overly conservative approach to the risk of loss associated with exposures covered by guarantees : they suggest that the risk of both a borrower and a guarantor both defaulting on the same exposure is lower than the risk of just one party defaulting. the committee believes that the new framework should recognise double default effects, and a working group is currently considering all of the implications, including those associated with measuring the effects, before we agree on a solution. we remain dedicated to finding a sound treatment of double default prior to the implementation of the new framework. other groups are discussing potential improvements to basel ii ’ s treatment of certain trading - related exposures. industry representatives had expressed the view that while many important advances had been achieved in the management and measurement of various risks arising from trading activities, neither the existing market risk capital rules nor basel ii went far enough in recognising them. we are now evaluating these views. because the treatment of the trading book is of great interest to banks and to securities firms, we are collaborating with the international organization of securities commissions ( iosco ) to clarify the basel ii rules and to find risk - sensitive capital treatments for certain trading book exposures that are compatible with basel ii. just last month, for example, the joint working groups completed a survey of trading book exposures in banks and securities firms, focusing on three main topics. the first concerns the criteria that firms use to determine whether an exposure qualifies for inclusion in the trading book versus the banking book. the second deals with the practices banks and securities firms use to value and measure the risk of trading positions. the third part sheds light on the treatment of counterparty credit risk issues related to repo - style transactions, securities financings and unsettled trades and credit derivatives. our working groups are currently evaluating responses to the surveys and will draw on the surveys to help inform