delisle worrell : general financial sector issues and policies opening remarks by dr delisle worrell, governor of the central bank of barbados, at the financial institutions conference “ general financial sector issues and policies ”, bridgetown, 3 november 2011. * * * this is our second annual conference for all financial institutions. we have a full day of discussion, which allows us to study current issues of the financial sector in depth. with the participation of all financial institutions, and with the collaboration of the financial services commission, we are able to take a comprehensive view of the financial system, including banks, finance companies, insurance, pensions, mutual funds, credit unions and securities. this conference deals with financial institutions that do domestic business ; in march this year we held a conference for financial institutions in our international financial centre, and that is also intended to be an annual event. since last year we have taken important steps to further strengthen financial oversight, and to increase the efficiency of the delivery of financial services. the most important of these was the establishment of the fsc, with responsibility for the supervision of non deposit takers. the fsc is in the process of recruiting staff and setting up systems, and central bank is lending its expertise wherever we can be helpful. this morning you will hear more about its activities from the fsc themselves. we have also been strengthening cooperation with banks which have domestic retail operations, through regular quarterly meetings, as well as ad hoc meetings when we need to make policy changes, such as the change in our foreign exchange margins. we are constantly strengthening cooperation with canadian and other overseas regulators, with the bank of canada and with the head offices of banks operating in barbados. we do consolidated supervision of all the operations of multinational banks, together with the regulators of all the countries in which these banks operate, through a variety of channels and mechanisms, including collective overview by the regulators and discussion with the banks in meetings which have come to be known as “ colleges ”. regulators also arrange conference calls and have informal contact, as well as more formal arrangements such as information - sharing memoranda of understanding. two weeks ago i led a team of my colleagues on a most successful visit to toronto and ottawa, where we had discussions with the major canadian banks, including those active in our international financial centre, with the office of supervisor of financial institutions ( osfi ), the bank of canada and the financial institutions supervisory committee, which also includes their deposit insurance corporation, their consumer protection agency and

those in the dominican republic and cancun, for example. instead we must exploit and develop barbados'reputation and appeal to the discriminating tourist who will pay a higher price for a more rewarding experience. we must become more adept in demonstrating that potential investments in upmarket projects are eminently profitable, and we must focus our competitive initiatives on countries and areas which serve the traveller who treasures an exceptional vacation experience. the financing of small business presents special challenges in all economies, not just in barbados, for reasons that have been aired extensively, and are familiar to all of us. barbados has borrowed from experiences in the uk and other advanced economies over many years, to establish a variety of funds and support schemes for small business. however, we could unquestionably do a much better job of coordinating services for small business, and channelling finance and support services in ways that are most helpful to each type of activity. capital markets have not proven to be particularly useful for small open economies, and very little investment in barbados has been funded by new issues of stock, over the life of the barbados securities exchange. it has to be admitted that an exchange with as little daily activity as characterises our own, has little potential to contribute to investment in producing goods and services. all that i have said so far paints a relatively benign picture of the efficiency of the financial services sector, in meeting the needs of barbadians. however, availability of finance remains number two in obstacles to doing business in barbados, in the world bank ’ s global competitiveness index. the reason may be that the sources of available finance do not cover innovation. it is the businesses which aim to break new ground which have difficulty in sourcing finance on terms which they can afford. what such firms need is equity finance, funds from sources which will not expect an immediate return, and can wait until the project becomes profitable. we should give some thought to this problem. it may be argued that there is an adequate supply of funds from sources that are prepared to take the long view, foregoing near - term returns on their investments in exchange for a higher yield over the life of the investment. insurance and pension funds, for example, may wish to allocate a portion of their portfolio in this way. what they may lack is an appropriate vehicle for channelling those funds in the direction of innovators. the stock exchange does not provide such a platform, because innovating firms will not have a track record of success