the non - age sensitive areas of budgets are clearly seen as strengthening this fiscal position. fundamental changes in policy design, particularly in the health and pensions sphere, in order to contain the cost of the public sector ’ s social insurance commitment to the elderly population and to contain systemic cost - augmenting pressures in the medical sector ; and measures designed to at least partially redress the influence of demographic trends on the workforce and thereby enhance growth rates and the government ’ s revenue potential. the position of the asian economies in the face of these choices of policy design in the key social sector differs in some important respects. for the industrial countries, the scope for significant policy changes is restricted by the maturity of their pension and health systems and the consequent difficulties of changing them. in contrast, the social service systems of many of the asian countries are still in a formative stage. this is particularly true for india and china, where fundamental reforms to both the health insurance and pension systems are now under consideration. there are both advantages and disadvantages in this situation. on the one hand, the problem of ageing is a bit premature for many asian economies ( e. g., india, pakistan, bangladesh ) while for some it is getting too late ( e. g., korea, china ). there is need to ensure that stable systems are put in place by the early part of this century but at the same time these systems have to be sufficiently flexible and moderate in their commitments on pension benefits. secondly, in designing present policies, the longer term demographic developments have to be borne in mind although there may be more pressing fiscal problems at hand. third, in view of the rapid pace of transformation of an ageing population, there is a need for policy makers to adequately modulate the speed of adjustment of reforms. finally, although policy strategies are highly reliant on private sector initiatives, the public sector has to play an important role in overcoming sources of market failure. many of the issues that will confront public policy makers are essentially distributional in character e. g., should there be a minimal income level for the elderly and who should finance such transfers. there has to be some reassessment of the generosity of some existing pension schemes and measures to alleviate the gender bias inherent in some pension schemes. in the area of medical care, policies have to address the issue whether access to medical care should be governed by financial ability. finally, the question of whether to broaden social security coverage beyond the

reliable conclusions to be drawn as to the risk distribution after the credit risk transfers. it can be concluded, though, that credit risks are borne by a larger number of market players than previously and that diversification possibilities are probably better utilised nowadays. in interbank business, too, more attention is being paid worldwide to default risks. a growing share of interbank business is hedged ; this is also the case in switzerland, where repo business has developed steadily. unhedged transactions still clearly account for the bulk of interbank business, but with an average volume of approximately sfr 20 billion, interbank repos, which were neglected for a long time, have grown to a respectable size. with respect to system stability, this development is favourable and should be further promoted. continuous linked settlement ( cls ) as regards credit risks in foreign exchange business, the launch of the cls system this autumn is a milestone achievement. cls bank, which has its headquarters in new york, serves as a platform to eliminate the so - called herstatt risk, i. e. the settlement risk inherent in foreign exchange deals. previously, the two legs of a foreign exchange transaction were settled at different times. if us dollars were bought against swiss francs, the franc amount was to be paid during european trading time. the corresponding amount in us dollars, however, was credited only a few hours later – during us trading time. in the few intervening hours, a credit risk existed. if a bank had been closed down during this time period, its counterparties might possibly have lost huge amounts of us dollar receivables. cls bank now makes it possible to settle foreign exchange transactions in the major currencies based on the « payment versus payment » principle, thereby eliminating the settlement risk for these transactions. currently, 42 financial institutions are directly linked to the system ( settlement members ) and settle their foreign exchange payments via cls in seven different currencies. one of these settlement currencies is the swiss franc. three swiss banks – ubs, cs and zurcher kantonalbank – participate in cls. apart from these three swiss banks, two other financial institutions – hsbc and bank of america – effect foreign exchange transactions in swiss francs via cls. every day, these five institutions together enter around 1, 400 payments in the amount of almost sfr 20 billion into cls. settlement takes place via a direct link between the swiss interbank clearing system ( sic )