jointly or via the imf, to lend large sums to another country will always be difficult. in a world of nation states, it is unreasonable to suppose that political considerations will not enter the choice of recipient of such largesse. and the greater the political uncertainty about the willingness to act as an ilolr, the larger the amount of funding that will be required. in turn, the operation will appear less credible, and the authorities are caught in a vicious circle. the current resources of the imf – between $ 125 billion and $ 150 billion depending on how they are measured – are wholly inadequate for an ilolr. nor are resources on the appropriate scale likely to be forthcoming. moreover, serious moral hazard arises when the private sector ignores the risks of lending to a country because it believes that the country would be bailed out by the international community in the event of a liquidity crisis. and investors are encouraged to lend to emerging markets in forms – short - term debt – which are more likely to be bailed out. in the domestic context, the lolr ensures that neither the managers nor the equity holders of the institution receiving support are allowed to benefit. internationally, it is not easy for the imf to penalise those responsible for management of the economy, nor to distinguish between those citizens that have been responsible for excessive risk - taking and those who will be the innocent victims of the consequences of a financial crisis. it is the ordinary taxpayers in emerging market countries who will have to bear the burden of servicing loans from the imf. 5 fischer, s ( 1999 ), “ on the need for an international lender of last resort ”, imf. a point stressed by calomiris ( “ the imf ’ s imprudent role as lender of last resort ”, cato journal, vol. 17 no. 3 1998 ) although he underestimates, in my view, the possibility of liquidity runs as seen, for example, in korea in 1997. absent a world government, it is difficult to see a credible ilolr on the horizon. the reason is the simple maxim : “ it ’ s the politics, stupid ”. the second purist solution, at the opposite end of the spectrum, is the imposition of permanent capital controls. in other words, a return to the world in which the bretton woods institutions were created half a century ago. the advantage of capital controls is that they prevent the liquidity runs that result from currency

jwala rambarran : strengthening the national financial safety net – a new agenda for the deposit insurance corporation of trinidad and tobago remarks by mr jwala rambarran, governor of the central bank of trinidad and tobago and chairman of the deposit insurance corporation of trinidad and tobago, at the 25th anniversary celebrations of the deposit insurance corporation of trinidad and tobago, port of spain, 5 november 2012. * * * ladies and gentlemen, on behalf of its board of management and staff, i extend a sincere welcome to the 25th anniversary celebrations of the deposit insurance corporation ( dic ). anniversaries have a special significance for society. children love to celebrate their birthday each year, and society often honours great people with a holiday on their birthday, even long after they have departed into the history books. wedding anniversaries are also significant shared milestones. ladies and gentlemen, the dic ’ s “ silver ” anniversary celebration comes at a time when the financial safety net has once again become a topic of prominent discussions, both at global and national levels. indeed, i find it almost uncanny how the conditions impacting recent disruptions in trinidad and tobago ’ s financial safety net, almost mirror the circumstances surrounding the origins of the dic some 25 years ago. regulatory failure back then, you may recall that the trinidad and tobago economy was painfully adjusting to the end of its second energy boom. the sharp contraction of economic activity, declining incomes and job losses partly contributed to the failure of many non - bank financial institutions in the mid - 1980s. but the more causative factors for the non - bank crisis seemed to be absence of regulation, weak managerial competence, poor or non - existence credit risk management and concentrated lending. as charles de silva opined in his october 1990 article on “ the law and the central bank : issues and implications for banking supervision in trinidad and tobago ”, that was presented at the 22nd annual conference of the then regional programme of monetary studies, “ the non - bank crisis in trinidad and tobago immediately called into question the capacity and competence of the regulatory authority. but although there were limitations in regulatory capacity, the major and more decisive weaknesses were readily seen to be the inadequacies of the legislation itself. ” unfortunately, the collapse of several finance companies and trust and mortgage finance companies was not averted. it is difficult, however, to know how long it took the officials at the ministry of finance and the central bank to recognise the impending danger of the sheer size and rapid growth