delisle worrell : reflections on financial stability analysis in the caribbean address by dr delisle worrell, governor of the central bank of barbados, at the conference on “ financial risk assessment in an integrating region – the caribbean ”, bridgetown, 25 november 2013. * * * through the caribbean network of economists, established by the region ’ s central banks and uwi, and centred at ccmf, the caribbean nations have kept themselves at the forefront of changing international currents in economic and financial analysis. financial stability analysis has been no exception. we were early in the field, and we have kept abreast of analytical developments over the years. as a result, three of our central banks now publish financial stability reports with in - depth analysis which is comprehensive, sophisticated and is designed to address the principal areas of potential vulnerability we face. that includes some analysis of regional risks, because our national financial systems are intimately linked, and it is necessary to assess regional ( and international ) risk exposures, in the search for completeness of national financial risk policy. among the earliest papers on financial risk in the caribbean ( or anywhere else ) were working papers by theatin and polius, under my supervision and in association with professor roland craigwell, which may be found among working papers on the website of the central bank of barbados. we were among the earliest to attempt estimation of the factors affecting risks of financial failure, when such research was in its infancy. we also have a history of regional financial surveys, reflecting the fact that our financial systems within the region have been interlinked by ownership and financial transactions for generations : the regional financial survey which has for two decades been a standard reference on caribbean financial systems, has recently been updated under the guidance of professor ramesh ramsaran. caricom ’ s investment surveys have included enlightening chapters on regional finance, and there have been surveys by the imf and others. in my own paper with cherebin and polius on regional financial systems, we included quantitative analysis of regional financial risk exposures. leah sahely and tracy polius have recently published a multivariate analysis of banking soundness in the eccu ; while sahely at the eccu developed a sophisticated and userfriendly template for stress testing. the financial stability department of the bank of jamaica, under the entrepreneurial leadership of dr. brian langrin, has produced an impressive stream of technical studies in the area of macroprudential analysis.

risk. there is a nontrivial risk, every time you go out in your car, that you will become involved in an accident. that doesn ’ t prevent us from driving our cars, even though the cost of an accident may be considerable, because we have insurance. secondly, we have to consider the impact of risk minimisation on our efficiency. we can minimise the risk of damage to our car by using it as little as possible, and taking the bus to work and school. not many barbadians are persuaded that is an efficient thing to do. thirdly, all of us have incorrect perceptions of risk. most people don ’ t realise that the risk of being murdered is actually lower than the risk of dying in a car accident, almost anywhere in the world. and even statisticians who are aware of it don ’ t derive any particular reassurance from that knowledge. fourthly, there are the risks we cannot know. on cctv on saturday evening i watched an animated debate between experts on either side of the debate about genetically modified foods. the truth of the matter is that the current generation of genetically modified foods has not been around long enough, in sufficiently widespread use, for us to know what the long term effects might be. the same is true of prolonged use of cellphones and computers. bis central bankers ’ speeches there are more technical imponderables with respect to the measurement of risks that cannot be readily explained in a short speech. for those who have an interest, i can recommend the excellent book " the black swan " by nassim taleb, which i reviewed for the central bank ’ s economic review, available on the central bank of barbados website. the complexity of the it security challenge is aptly illustrated by an email members of the barbados information society received from the late great james corbin, just before his tragic death. in it he reported that computer power was now available to uncover even the most secure password, by a massive process of iteration, in shorter times than we would have expected. does that mean we should not have secure passwords? absolutely not ; we should be as secure as is reasonable, using numerals in combination with upper and lower case letters. but i, for one, will not henceforth ever compose a password that is longer than is called for by the programme or service i am using. in view of the complexity of the issues, and the number of unknowables, what we may expect