ewart s williams : trinidad and tobago ’ s secondary market for government securities opening remarks by mr ewart s williams, governor of the central bank of trinidad and tobago, at the launch of secondary market for government securities, port - of - spain, 28 january 2008. * * * an important aspect of the mandate of any central bank and particularly a central bank of a developing country is the development of an active capital market. why? because an efficient capital market is an indispensable requirement for sustainable economic transformation. the reasons for this are well - known to you, i am sure, but let me simply re - iterate a few of them. an efficient capital market : • supports the mobilization of domestic savings by providing investors with alternatives for investment and risk diversification. • permits companies and governments to raise long term resources at lower cost. • promotes efficiency and competition in the financial system. • creates an avenue for the population to participate in the corporate sector and share in its wealth. there is a more or less widely recognized sequencing for capital market development and it goes like this : • it usually starts with treasury bill issues, to fund government ’ s short term financing needs and the formation of some kind of money market in which there is the trading of short term funds – a good example is the inter - bank money market. • the second stage is usually a primary government securities market where government issues bonds to help finance capital projects. in the early stages, government securities may be issued to a captive market – for instance to pension funds and insurance companies to help them meet statutory requirements. during this stage, the distribution process tends to be non - transparent and, in a seller ’ s market, at below - market interest rates. • as the economic transformation process evolves, governments seek to promote a third stage – that is the development of a rudimentary equities market. with these basic structures in place efforts are focused on refining and improving the infrastructure related to the government securities and equities market … until, there is a move to the third stage, that is : • the development of a secondary market in government securities and a bit later, a market for corporate securities and a derivatives market. these stages very often overlap and small developing countries seldom move beyond the state of primary government bond issuance and illiquid equity markets. we in trinidad and tobago are trying to move beyond the limitations dictated by small size to create a diversified capital market to facilitate the process of economic transformation and

, catastrophic and next to impossible to forecast. it was a black swan. renowned economist nouriel roubini, who was ahead of the curve in predicting the financial meltdown in the united states, and stephen mihm, a journalist and professor of economic history, in their new york times bestseller “ crisis economics ”, argue otherwise. far from being the exception, crises are the norm. crises follow consistent trajectories and yield predictable results. all crises end, but their aftershocks can linger on for years, if not decades. like the americans, trinidadians experienced their own black swan event on january 30, 2009. by lunch time, the central bank had announced its intervention in clico, the largest local insurance company and one of the largest in the caribbean, clico investment bank ( cib ), and british american insurance company ( trinidad ) limited ( bat ), all subsidiaries of the cl financial conglomerate. large scale government intervention was needed to support these subsidiaries and to prevent the eruption of systemic risks. bis central bankers ’ speeches so, this morning, i want to talk about three things : • first, some of the key risks and challenges to global financial stability occupying the world ’ s attention four years after the free fall of the u. s. financial system ; • second, current financial stability issues in trinidad and tobago, in the aftermath of our own clico crisis ; and • third, the role of the central bank of trinidad and tobago in strengthening financial stability, enhancing economic confidence and staying ahead of the curve. risks to global financial stability let me begin with a brief overview of risks to global financial stability. sadly, the news is not so good. the global financial system is facing a period of elevated uncertainty which is the achilles ’ heel to an economic recovery that was not strong from the start. the sovereign debt crisis currently unravelling in europe has renewed financial turbulence, weakened investor confidence and may also threaten the fragile world recovery. the markets need the assurance that the european central bank and key partners in europe will take bold and continued policy actions to avert a deeper crisis. the actions of the ecb at its meeting today will signal the outlook for the euro in the months ahead. there is little doubt that the euro area ’ s crisis remains the most immediate and most serious threat to global financial stability, and there is the fear that conditions could worsen, with many now contemplating the consequences of a black swan scenario in which greece exits the euro zone. in