we have seen, even here in the caribbean that there is such a thing as “ too big to fail ”, or rather, “ too big to be allowed to fail ”. there is currently a debate as to whether large financial entities should have a progressive scale of capital requirements, which require bigger entities to hold more capital pro - rata. the other concern being debated is whether financial entities should be allowed to become too large. transparency, accountability and trust another important factor observed during the meltdown was that the more sophisticated securitization became, the more opaque the instrument, so that is was often not possible to tell what the risks of the instruments were and who was bearing that risk. so much so that entities then bought back some part of the securities they had distributed without realizing it. a way needs to be found to track the risks in these securitized instruments. processes and practices the micro prudential approach to supervision has emphasized protection of the small depositor and reducing the likelihood of failure of an individual institution. in the past, this might have been sufficient to bring comfort to many consumers. however, by re - focusing on the financial system as a whole, we reduce the risk of concurrent failures of systemically important institutions. such a change is necessary to enable us to withstand and rally against future shocks and developing a framework for macro - prudential regulation will be an important step. this is another important area of focus on the post meltdown period to which attention must be paid. emphasis on the risk behavior of both bank and non - bank financial institutions, and the counter - cyclical approach of building buffers in good times is another needed change. indeed, the pro - cyclicality of the system has been frequently criticized. another area of interest is the scope of regulation. given the propensity of risk to migrate from regulated to less regulated sectors, requires that corrective approaches be equally considered in both the bank and non - bank sectors. this wider regulatory coverage already exists in barbados in respect of non - banks but steps are in train to strengthen oversight of other entities which will fall under the new financial services commission. on a global scale, the form which increased regulation will take is still being developed. i am sure that we will get some early indications from our speakers on how this is likely to develop. what the global crisis has taught us is that there is need to take the time out from managing complex technical issues to ensure that there are crisis management plans that can be

dimensions. the breath of responsibilities of the regulator are now also being revamped, particularly in the us, as is the question of how much should be left to the market and how much should be directly regulated. the age of deregulation may well be about to witness some fundamental changes and reversals. governance good governance aids regulation. regulators are therefore calling on institutions to institute voluntary governance practices to deal, for example, with excessive risk taking, rather than opt for a system of imposed over - regulation. adequate oversight by boards is important, as is adherence to codes of ethics. importance of collaboration what has become very clear, and we have seen it even in the caribbean, is that there is now significantly more emphasis being placed on collaboration among regulators, and on reducing regulatory arbitrage – that is, the ability of entities to cherry pick where they do business, so avoiding the stricter type regulatory domiciles, because of differences in regulation. this is particularly important in single economic zones like the caribbean, and on a larger scale, the eu. derivative trading while the caribbean has not been too heavily involved in derivative trading, the regulation of derivatives has attracted a lot of attention, since many of the problems in the credit markets were attributable to the ability of financial firms to originate poor credits and redistribute them to others, thus leaving the burden of poor credits which they had originated on the books of others. it is important that solutions are found to this issue. branch / subsidiary operations the branch subsidiary responsibility and where it lies has also surfaced in many jurisdictions. because an entity is setup by way of subsidiary rather than a branch does that give the parent an escape route? or should the parent shoulder its responsibility even though the entity is set up as a subsidiary? adequacy of capital another issue of importance is the question of the adequacy of capital. this has become an important matter in the post meltdown period. many jurisdictions have taken steps to increase capital adequacy. even before the global crisis barbados had taken such steps. however, the adequacy of capital is being increasingly critical. will capital ever be a fail - safe requirement? if it were, capital levels would have to be so high as to stymie the development of financial institutions. what therefore is the balance which has to be struck? and what are the accompanying requirements which must support capital requirements? these are important areas to be considered. too big to fail