and statutory payment moratoria, as well as the ecb ’ s expanded set of unconventional monetary policy measures and prudential actions. these measures have been successful in helping the economy to absorb the shock of the coronavirus pandemic and have helped mitigate risks to financial stability. corporate insolvencies have been limited and the rise in unemployment contained. sovereign debt markets have remained stable, and these policy actions have prevented adverse feedback loops between the real economy and the financial system. in stark contrast to the global financial crisis ( gfc ), banks have helped cushion the economic impact of the pandemic rather than exacerbate it. bank capital and liquidity positions were much stronger at the onset of the pandemic than they were in 2008, bolstered by the post - gfc regulatory reforms. moreover, capital relief measures implemented by micro - and macroprudential authorities, coupled with banks retaining profits, generated additional capital space to absorb losses, permitting banks to maintain the flow of credit to the real economy. while bank valuations were hit hard in the initial phase of the crisis, in part from a significant drop in profitability, market sentiment has become more positive since late 2020. bank equity prices rallied on positive news about vaccines and rising reflation expectations, with investors 1 / 4 bis central bankers'speeches anticipating that a steepening of the yield curve could support bank profitability. banks ’ results in the first quarter of 2021 exceeded expectations, analysts have upgraded their profitability projections for 2021 and 2022, and bank equity prices have almost returned to their prepandemic levels. but long - term structural issues persist … nonetheless, despite growing market optimism, euro area banks still face important risks and continue to grapple with the long - run structural challenge to achieve a sustainable improvement in their profitability. the better - than - expected earnings in the first quarter of this year should be put into context. in the first place, a key driver of increasing net profits was a fall in loan loss provisions, in view of the brighter economic outlook. second, better - than - expected earnings are also partly due to strong trading income, which is volatile and depends on market conditions, while net interest income remained under pressure. despite the sharp recession, banks ’ non - performing loans ( npl ) ratio reached its lowest level on record at 2. 6 %, on average, at end - 2020, even if this masks some dispersion among euro area banks. furthermore

the united states. in 2050, for example, the number of retirees for each 100 working - age people in the united states should be about the same as in 2030, about 34, but the number of retirees per 100 working - age people is projected to increase to about 60 in the euro area and about 78 in japan. we see that many of the major industrial countries - particularly japan and some countries in western europe - have both strong reasons to save ( to help support future retirees ) and increasingly limited investment opportunities at home ( because workforces are shrinking and capital - labor ratios are already high ). in contrast, most developing countries have younger and more - rapidly growing workforces, as well as relatively low ratios of capital to labor, conditions that imply that the returns to capital in those countries may potentially be quite high. basic economic logic thus suggests that, in the longer term, the industrial countries as a group should be running current account surpluses and lending on net to the developing world, not the other way around. if financial capital were to flow in this " natural " direction, savers in the industrial countries would potentially earn higher returns and enjoy increased diversification, and borrowers in the developing world would have the funds to make the these data are from annex table 58, oecd economic outlook, vol. 76, 2004, p. 226. the latest year for which data are available is 2003 for germany and the united kingdom, 2002 for france, italy, and japan. china is an important exception to the generalization that developing countries have young populations. the country's fertility rate has declined since the 1970s, and its elderly dependency ratio is expected to exceed that of the united states by midcentury. capital investments needed to promote growth and higher living standards. of course, to ensure that capital flows to developing countries yield these benefits, the developing countries would need to make further progress toward improving conditions for investment, as i will discuss further in a bit. a second issue concerns the uses of international credit in the united states and other industrial countries with external deficits. because investment by businesses in equipment and structures has been relatively low in recent years ( for cyclical and other reasons ) and because the tax and financial systems in the united states and many other countries are designed to promote homeownership, much of the recent capital inflow into the developed world has shown up in higher rates of home construction and in higher home prices. higher home prices in turn