of monetary union that was previously priced - in by markets. today, the euro area is therefore a more stable and resilient place to invest in than it was a year ago. and not a single euro of government bonds has been purchased under the omt programme. strengthening banks ’ risk absorption capacity banks ’ capital position clearly lies outside the remit of central banks. in fact, it is – first and foremost – the responsibility of shareholders to ensure that their bank is solvent and able to sustain its core business. and if the private sector is unable or unwilling to provide the capital necessary to achieve solvency, it is for the fiscal and regulatory authorities to decide whether and how to act. monetary policy cannot substitute for or subsidise either of these policy domains. bis central bankers ’ speeches but the euro area has achieved significant progress in terms of solvency. banks have received fresh capital. problematic legacy assets have been removed from banks ’ balance sheets, notably in countries under financial assistance programmes more remains to be done. in particular, two policy initiatives should take precedence. first, we need to create full transparency about the risks on banks ’ balance sheets. such transparency is a pre - condition for the banking sector to return to lasting health. and a healthy banking sector is a pre - condition to revitalising bank lending. second, we must align investors ’ incentives with those of society. this means that market participants that stand to benefit from the upside of risky activities should also bear commensurate losses on the downside. europe is making some progress in these areas too. to strengthen transparency, we are establishing a single supervisory mechanism ( ssm ), which tasks the ecb with overseeing major parts of the european banking system. by placing this responsibility with an independent institution at european level, the single supervisory mechanism will ultimately allow earlier identification of financial risk. to strengthen incentives, the institutional architecture is being augmented by rules to facilitate investor participation in dealing with distressed banks. in particular, harmonised rules and procedures for bank recovery and resolution are currently being developed at european level. to ensure a fully consistent and effective application of these rules, their implementation should be placed within the remit of an independent single resolution mechanism. before the ecb takes over the ssm, it will conduct together with the national supervisory authorities and with an appropriate involvement of private sector companies, a balance sheet review of those banks that it takes into the ssm. to this end, the national budgets and where needed, the es

aging of the population occurs over a shorter period and at a faster pace than you might expect. 8 the good news about demographic change is that we can forecast prospective changes well in advance and with a certain degree of accuracy. in addition, emerging countries can learn from the precedents set in those advanced countries that are already experiencing problems related to an aging population. it is not too early to start preparing for prospective aging. although population aging has a wide range of economic implications, i would like to focus today on one of the main issues associated with aging, the pension system, by reviewing national institute of population and social security research, " population projections for japan. " japan's experience. the pension system is at the core of the social security system. as the pension system has a significant impact on people's lives, careful and detailed consideration is necessary before implementing reforms. for over 20 years in japan, we have been discussing various issues, including how to secure the financial resources necessary to support the pension system, and have made steady progress with reforms. the japanese pension system is largely based on the so - called pay - as - you - go scheme, where benefits for the elderly are paid out of premiums collected from the contemporary working age population. therefore, the aging of the population demands a regular review of the balance between premiums, benefits and government subsidies. after long and intensive discussion, a number of reforms have been adopted, including a raise in the pension age and an increase in the subsidy from the government. a mechanism called the " macroeconomic slide " has also been introduced, which automatically adjusts the amount of pension benefit by taking into account changes in the number of people insured and average life expectancy. at least once every five years, the government must carry out a comprehensive review of the financial conditions of the pension system, including its long - term prospects. the aging of the population has huge implications not only for the pension system but also for public finances in general. expenditure on health and elderly care has increased significantly in japan. the proportion of social security expenses to total annual expenditure has soared from around 14 percent in 1970 to around 35 percent at present. maintaining the credibility of public finance by ensuring medium - to long - term fiscal sustainability is essential. to this end, planning and reviewing the social security and tax system so that they can adapt to demographic changes is critically important. maintaining economic vitality amid an aging and shrinking population is also a critical issue. from a macroeconomic perspective