delisle worrell : ifcs in a borderless digital economy opening remarks by dr delisle worrell, governor of the central bank of barbados, at the conference “ ifc ’ s in a borderless digital economy ”, bridgetown, 11 september 2014. * * * small international business and financial centres like barbados make it possible for international firms to increase their competitiveness in international commerce and finance by locating aspects of their business in subsidiaries located in our international business centre. that is because barbados offers financial, accounting, legal, trading, information, administrative, and other services that are up to international standards, at costs much lower than would be the case in the major financial centres of the world. in barbados firms also find regulatory standards of a quality that are attested to by the imf, world bank, oecd and other international bodies. other advantages that contribute to barbados ’ competitiveness include our institutional strength, social services, and technological readiness. during the course of today ’ s seminar our speakers will demonstrate that small international financial centres such as barbados provide internationally comparable financial and business services at competitive prices, when all the factors that affect the investment decision are taken into account. in this 21st century we live in a new world where production processes transcend national boundaries, even for the smallest of firms. the chinese internet retail service company alibaba, which is currently on a roadshow for what is expected to be among the largest initial public offerings of its kind on international capital markets, advertises itself as a supplier to firms as much as to households. because of telecommunications it is possible nowadays to provide the inputs into any firm ’ s production process from a variety of sources, in many different locations, anywhere in the world. as you would expect, this benefits everyone : producers are able to secure materials, skills, finance and other inputs in the most cost effective manner, and consumers benefit because firms are able to offer best value for money as a result. small ibfcs like barbados enrich the options available to international companies in locating services for the global market, so they may offer more competitively priced goods and services. every ibfc has a unique mixture of characteristics which defines its comparative advantage, and the activities it will attract as a result. in barbados ’ case, a strong network of double taxation treaties is a distinguishing feature, along with the advantages previously mentioned. the globalisation of business therefore offers exciting possibilities for all nations to increase the competitiveness of firms, and to

the pressure on economic policymakers increases. when deflationary risks are under discussion in germany, attention is soon focused on monetary policy. some economists claim that the ecb ’ s policy is not expansionary enough for germany. it is argued that real interest rates are higher in germany than in many other euro area countries because of our low rate of inflation. i believe, however, that it is not sufficient to look at real interest rates in isolation. we have to take into consideration at least two other factors. first of all, it has to be pointed out that the relatively low inflation rate in germany results in a real depreciation within the euro area. by itself, this leads to increased competitiveness on the part of the german economy. second, with regard to wage rate policy, we repeatedly have to make clear that the rate of inflation in germany is lower than the euro - area average. the more that fact is taken into account in collective wage negotiations, the lower will be the risk of deflationary tendencies. financial markets in the discussions on deflationary risks in germany, the question of the stability of the german financial system is always raised as well. it is argued that while, in the us, households are bearing the brunt of declining asset prices, in germany a wide range of financial institutions are being affected by the deterioration in asset prices and credit quality. allow me to make four comments on that. my first remark concerns households. according to our own estimate, a 30 % decline in equity prices dampens gdp by between 0. 1 and 0. 2 percentage point as a result of a fall in private consumption. this is much lower than estimates for the us. the difference is mainly due to the fact that, in germany, only 20 % to 25 % of equities are held by households. the volume of total shares outstanding in relation to gdp is well below the us figure. second, i would like to point to the fact that a decline in equity prices also has an effect on corporate finance. in germany, however, only 5 % to 7 % of the financial needs of the corporate sector are covered by the equity market. nevertheless, access to the bond market has also become more difficult for some enterprises owing to the fact that their credit rating has declined. for some firms, the high risk premium on corporate bonds has pushed up financing costs. since german non - financial enterprises obtain no more than about 2 % of their funds through bonds, however, no severe problems