##firmation that ibl has consolidated its position in its core banking business and now feels itself secure enough, confident enough and strong enough to spread its wings. the re - launch is also timely from a business viewpoint as it places the bank in a position to participate in the burgeoning capital market, which is now rivaling the traditional banking sector institutions as a preferred source of business financing. it will certainly help that the intercommercial trust and merchant bank would have the capital market experience of both jmmb and cmmb to rely on. over the last five years the value of sovereign bond placements in trinidad and tobago has amounted to more than $ 16 billion while private debt issues have amounted to $ 10. 5 billion over the period. also, with the rapid diversification of the economy, trade and project financing, commercial paper and various forms of structured finance typical of merchant banks, are increasingly becoming important sources of funding business activity. so there is a good case for a re - entry into merchant banking. however, merchant banking has its own challenges. as bankers, you know that dependence on diversified funding sources such as money market instruments and long - term foreign currency borrowings is invariably more risky than dependence on vanilla deposits. on the assets side, secured loans and advances, which are the standard fare of commercial banks, carry lower risk than the investments that are likely to dominate the balance sheets of merchant banks. in short, the shift to merchant banking will create demands for new competencies, new systems and new governance and risk management structures. as you know, the evolving structure of the financial system is also creating new challenges for the central bank as regulator. we are currently addressing these challenges through : ( i ) transforming our supervisory system into a more integrated risk - based framework ; and ( ii ) strengthening our overall legal and regulatory infrastructure, in line with international best practices. in particular, this implies, inter alia : ( i ) ensuring that institutions – big and small – have adequate governance systems in place ; ( ii ) insisting on enhanced reporting and disclosure standards ; ( iii ) putting in place procedures for the sharing of information with other regulators both locally and regionally ; and ( iv ) ensuring that financial institutions strengthen their risk management practices. in this context, the bank is working on amending capital adequacy rules to ensure that all major risks are appropriately identified and mitigated. i was very impressed by the mission statement of the intercommercial trust and merchant bank –

because inflation is all we care about. it is there because we believe that low inflation is a necessary condition for sustainable economic growth and good monetary policy is essential to its achievement. the results over the past fourteen years provide evidence in support of this assessment. it is important to have a framework because there has historically been a temptation to use monetary policy for too many purposes. we still hear calls from time to time to raise interest rates to improve the balance of payments or to stop rising house prices, or, on the other hand, to lower rates because the economy has slowed. in the past, these and other motives often lay behind monetary policy changes, but now it is easier to resist such temptations because they have to be viewed within a more general framework based on their likely implications for future inflation. the world economy and australia ’ s place the second important element is to have a view about how the world economy is evolving and how this will affect australia. it is fair to say that the major macro - economic events that have affected australia have to a large extent been imported rather than home - grown. in australia, the two major economic events of the last century - the depression of the thirties and the inflation of the seventies the world ’ s only peacetime inflation - were both part of worldwide developments. more recently, the international business cycle has been the main determinant of our own ; the three most recent australian recessions of 1974, 1982 and 1990 were part of global recessions. over this period, we have not had an entirely self - induced recession. our one significant deviation from the international business cycle is that we did avoid the ( admittedly mild ) 2001 recession that affected most g7 countries. similarly, our inflation experience shadowed that of the oecd - area, although we were later than most in bringing it down after the initial surge in the seventies ; our good inflation record only dates from the early 1990s. i think it is true to say that if you wished to forecast the path of the australian economy, and you were able to have foreknowledge of only one economic variable, the one you would choose would be the path of the world economy. that is not to say that we have no influence over our own destiny - we can make the situation better or worse than it would otherwise be - but we cannot escape the influence of the world business cycle and the other factors that feed off it. once the central bank has established what it is trying to achieve with monetary policy