that level of reserve cushion, rumours of an impending devaluation are misguided. i would like to make some comments about the challenges that the central bank, as regulator, faces in a rapidly evolving financial system. several analysts have put the blame for the clico / cib financial collapse squarely on inadequate regulation by the regulator, the central bank. of course, this is what happens whenever there is financial stress. invariably, the finger is pointed to the regulator. inadequate or the absence of regulation has been blamed for the collapse of financial institutions in the united states, as well as for the madoff and stanford scandals ; the fsa has been faulted for the demise of the northern rock and the other failed institutions in the uk and the list goes on and on. if you look across the world, it seems that regulators are busy trying to resolve some sort of financial calamity. but regulation of financial institutions is not new. regulation has been in existence for over one hundred and fifty years. so why have regulators not mastered the job of regulation. well, i could think of three reasons : 1. rapidly evolving innovation and creativity in terms of services and products being offered by financial institutions. 2. the recognition that risk taking should not be totally outlawed since under certain conditions it could benefit consumers. 3. the fact that laws cannot legislate good behaviour or by extension, good governance. 4. an ideological shift towards free markets and minimal regulation. how does this relate to cl financial and clico. clico, in many ways, was a pioneer and a path - breaker on the local financial scene. for years it led in the provision of insurance services in trinidad and tobago and indeed in the region. for the most part, clico ’ s expansion proceeded under conditions of limited regulation as the office of the insurance supervisor, in the ministry of finance, lacked the resources to act as a regulator. as you know, in the early days insurance companies collected premiums and invested the proceeds in government securities and in mortgages. over time, as incomes and the demand for savings - products increased and as our local capital markets did not expand in step, insurance companies had to look further afield for investment opportunities. clico was the leader in this endeavour. by the time the insurance industry was transferred to central bank in mid - 2004, cl financial, with clico as its main financial company, had already become a major conglomerate in trinidad and tobago and in the region with 60 subsidiaries

even when this has meant bringing us in line with international best practices. and then there are the consequences of limited market discipline. for all its tremendous growth over the last several years, clico has remained a private company which has shielded the company from the kind of scrutiny ( through, for example the submission of quarterly accounts ) to which public companies are exposed. i would want to posit that the clico / cib crisis represents a case of “ systemic failure ” from which we all can take invaluable lessons. clearly we need to upgrade our legislation as a matter of urgency. it is hoped that the recent international financial crisis as well as the recent stresses in both the credit union and the insurance industry would convince industry participants of the need for modern legislation to cope with a modern financial sector. two, directors and management need to take seriously their fiduciary obligation to protect depositors ’ / policyholders ’ funds. independent directors have a special obligation to provide checks and balances and play a “ whistleblowing role ”, if necessary. three, external auditors must also recognize their fiduciary responsibilities and must be held accountable. the self - regulatory bodies must set and enforce the highest auditing standards. that ’ s the legacy of enron and world com. four, as regulator we need to continue to upgrade our skills and quickly achieve the level of competence in the insurance regulation as we have achieved in bank regulation. of course, we have been in bank regulation for close to fifty years whilst we have only recently been doing insurance. the clico / cib crisis is a major setback for the financial sector in the region. we have been able to contain the contagion but the challenge of strengthening market confidence and ensuring that the cost to taxpayers remains minimal in the medium term is ongoing. the clico / cib collapse should be a lesson that serves to strengthen our financial system for the next several years.