associated with them, people have come to see mostly the “ dark side ” of these services. nonetheless, there is still an essential need for financial products and services that can help individuals and firms manage their risks, since sustainable economic development can only be achieved through sound risk taking by private entities. moreover, financial institutions will be expected to play an even more active role as more countries face the problems arising from population ageing. this is especially relevant to satisfying the need for longevity risk for a theoretical framework of rational decision under investment irreversibility and ( fundamental ) uncertainty a la frank knight, see nishimura, k. g., and h. ozaki, “ irreversible investment and knightian uncertainty, ” journal of economic theory, 136 ( 2007 ) 668 – 694. bis central bankers ’ speeches management and in coping with the problems of declining fertility, since financial institutions ’ full use of their technologies and resources is the key to solving these problems. thus, financial service providers should be able to contribute to the economic society by providing people with the tools to address the risks and harsh uncertainties of life, while enabling them to enjoy its thrills and happy surprises. in this respect, i believe that regulators and supervisors should bear the following two things in mind : first, regulators and supervisors should always have a cross - industry and in some cases cross - border perspective, and they should also have a grand design as to how the economy can spread the risks necessary for sustainable growth, especially under population ageing. second, regulators and supervisors should be aware that a desirable regulatory framework will continuously evolve, partly due to population ageing and the consequent structural changes in the economy and financial services. the current structure and regulatory framework will not last forever, and neither will sectoral classifications such as “ banking, ” “ insurance, ” and “ securities ”. for example, increased demand for longevity risk management could perhaps foster new cross - industry innovation between medical and financial services. from its unique vantage point, the joint forum is able to observe the signs of structural changes in financial services and to identify the need for regulatory and supervisory evolution. i sincerely hope that the forum will continue to be attentive to new developments in financial services and lead the global debate on regulation and supervision. now i come to the final words of my speech about ageing. just as we mortal individuals mature and come of age, so too do institutions. here is the bank of japan ( figure 4 )

repeatedly published its forecast in which the decline in the fertility rate was declared to be only temporary and the birth rate expected to rise again soon ( figure 2. ) similarly, life expectancy forecasts have shown that the actual figures consistently exceeded the forecasts ( figure 3 ). these forecast errors show the fundamental uncertainty surrounding the pace of population ageing. and if the actual outcome deviates from the estimated life expectancy and longevity of the entire population in an economy, all service providers will be affected. for example, in the case of longevity risk products, even a slight deviation could significantly increase the exposures of service providers. avoiding patchwork and “ spaghetti code ” problems regulatory and supervisory reform is often called for once such deviation causes an unexpected accumulation of losses. however, this kind of loss - induced regulatory and supervisory reform often leads to patchwork plumbing, which in turn results in a vicious circle of further losses and more patchwork. the repetition of such ad - hoc adjustments to the framework can cause what computer programmers refer to as “ spaghetti code ” problems, in which the framework becomes too complex and entangled, like spaghetti, so that no one knows how to fix the problem. thus, we must be careful not to make over - optimistic forecasts, especially when these forecasts underlie the overall framework and any forecast error might bring about irrevocable losses. it is also important to have in advance a clear strategy on appropriate policy responses when a forecast error is observed, especially in dealing with “ spaghetti code ” risks. the performance of the framework should be subject to continuous review, and necessary measures should be readily available at all times. with these measures in place, it should be possible to prevent a mere forecast error from turning into an “ irreversible ” disorder of the whole system. in this sense, it is better to address the challenges of population ageing by incorporating a second best “ fail - safe ” mechanism into our overall institutional framework, rather than by chasing the first best solution while pretending our forecasts are always rational and unbiased. 2 concluding remarks the recent financial crisis has completely changed the landscape of financial services, both for financial institutions and for supervisors. before the lehman crisis, people tended to see only the “ bright side ” of new financial products, such as securitized products, derivatives, and cross - border transactions, believing them to be backed by advanced and innovative risk - management and investment tools. however, since the crisis revealed the risks and problems