production process may become more capital intensive, leading to a fall in the productivity of new capital and, in theory, a decline in the rate of capital return. investment could be less dynamic and negatively impact potential growth. this would in turn have an adverse impact on the real interest rate, so that domestic savings and investments would balance. one danger of such developments is that, in the face of a prolonged period of low interest rates, asset managers might be tempted to chase “ tail - risks ”. this calls both for more market discipline in the form of better monitoring and disclosure of the risks borne by financial institutions and possibly by investors, and for a close supervision of these institutions. demographic shifts are a key factor in the equation of the future world economy. they are key for economic activity, the fiscal stance, and, maybe less obviously, for the monetary policy stance, given their impact on output gap and financial stability. that is why i found the topic of this session particularly appropriate and timely, and i am sure that your discussions will bring very interesting insights. bis central bankers ’ speeches

capital purposes. the bank will shift from use of the mapping function to its own internal estimates of lgds when they become reliable. another key area in the u. s. basel ii proposals relates to regulatory reporting and data requirements. the agencies expect to issue information about this aspect of our proposals soon, so i will offer only a few general thoughts here. as you know, risk managers need to be able to discern whether fluctuations in risk exposures and capital are due to external effects, such as changes in the economy and the point in the economic cycle where decisions are being made, or are more related to their individual business decisions, including product characteristics, customer mix and underwriting criteria. we will continue to expect bankers to anticipate the effects of such economic fluctuations and business decisions, not just analyze them after the fact. as we move toward greater risk sensitivity in our regulatory capital framework, and greater alignment with what banks are doing internally to manage risk, the way in which we as supervisors assess the adequacy of capital levels must consider the sources of these fluctuations more than ever before. this requires both bankers and supervisors to place a greater emphasis on high - quality data and sound analysis. for example, data should contain enhanced lookback capabilities, so that we and bankers will be able to assess fluctuations within an institution over time. unfortunately, in our qis4 analysis we were unable to decompose changes we observed into those attributable to the economic cycle and those attributable to a bank ’ s individual portfolio composition because the qis4 data were collected at a single point in time. even comparisons of qis4 information to previously collected qis3 data were limited because there was no direct link between the two data samples. as part of the move toward greater risk sensitivity, and noting that different institutions have different risk profiles, we expect to place increased emphasis on sound economic analysis that focuses on changes observed at a single institution over time, as well as more traditional analysis across institutions. basel i modifications at this point i would like to say just a few words about ongoing efforts to revise existing basel i regulatory capital rules for non - basel ii institutions. we expect only one or two dozen banks to move to the u. s. version of basel ii in the near term, meaning that the vast majority of u. s. banks would be able to continue operating under basel i, which will be amended through a separate rulemaking process. the basel i framework