With the accelerating pace of regional integration, financial institutions are presented the opportunities to broaden beyond domestic borders to capture opportunities for the regional markets. It has been more than 5 years since the Financial Sector Master Pan was launched. The strategic focus has allowed us to promptly emerge from the crisis management mode and moved full steam ahead towards developing the financial system, The initiatives undertaken have now laid a strong foundation for the development of a strong and diversified financial system. Significant progress has been achieved in building the capacity and capability of the financial sector and in putting in place the necessary financial infrastructure including the supporting legislation and the domestic financial markets. 2  BIS Review 55/2006  The financial landscape and operating environment that is envisaged in Phase 2, where domestic banking institutions would have built greater capacity and capability to compete, is also progressing as planned. The level of competition in the financial system has increased significantly, fuelled by greater expectations from customers and facilitated by a more flexible regulatory framework and increased deregulation and liberalisation. This has resulted in improvements in the delivery of financial services and more efficient pricing and risk management, all of which contribute towards raising the level of economic performance. The wide range of measures to improve efficiency and effectiveness of the financial institutions, include initiatives on improving risk management practices, further developing the human capital and building talents for the financial sector, as well as measures to elevate the level of consumer awareness.

Today we help promote financial literacy through a video competition in partnership with the Puerto Rican Bankers Association. Our banking supervisors work to strengthen the financial system so it can readily supply credit to families and businesses, while our research economists monitor and analyze local economic conditions. This analysis – along with similar analyses from other regions across our nation – feeds into the decisions the Federal Reserve makes on monetary policy. In support of this work, I and other senior officials have traveled to Puerto Rico a number of times in recent years and met with a wide range of stakeholders, including university officials, students, business leaders, entrepreneurs, bankers and government officials. What we learn during these engagements helps to shape our understanding of the Puerto Rican economy and our efforts to support it. I have seen numerous examples of expansion and growth. This gives me confidence that Puerto Rico has the capability to be an economic success story. Nevertheless, these local engagements have also confirmed to me that conditions are not what we want them to be – in particular, growth and expansion are not happening broadly enough. The task of putting the Island on a path of robust, sustainable and inclusive growth remains a work in progress. During my visit here in March 2011, a number of business and community leaders expressed their concern that the economy had loss competitiveness. These local leaders asked if we would look at what might be holding back growth on the Island.