marion williams : the current turbulence in the us financial markets and its implications for barbados comments by dr marion williams, governor of the central bank of barbados, on the current turbulence in the us financial markets and the implications for barbados, bridgetown, 24 september 2008. * * * while the current turbulence in the us financial markets is unlikely to have a significant impact on barbados immediately, as the us economy slows or goes into recession as it copes with these difficulties, the result could be a slowdown in the growth of the barbados economy going forward. recession in the uk and some european economies would also impact adversely on our tourism prospects and our investment inflows. however, the barbados financial system should remain sound although there may be some loss in value ( realised and unrealised ) on us dollar fixed income securities held by financial institutions, including the central bank, as securities ’ prices in the us markets tumble. however, such losses in value are not expected to be significant in relation to the overall portfolios of these institutions, particularly over the medium term and especially for those who tend to hold short to medium term securities to maturity. for non - bank institutions with us equity portfolios, long - term investors would have some tolerance to the current volatility in the equity market but may record unrealised losses in the short term. for some institutions in the international financial business ( or offshore ) sector who trade more aggressively in us stocks and in fixed income securities and more especially in derivative instruments, particularly those who may have been doing active business with those us financial institutions involved in the us financial melt down, realised losses may be recorded. this is likely to be mitigated by the actions of the us government to bail out these institutions. details of the bailout are not yet clear, but it is expected that there will be free access to assets placed with these institutions where funds are held in an agency or custodial capacity on behalf of overseas investors. funds held in the capacity of agent by these us institutions should retain their agency status and should not be affected by the financial losses of these institutions. administrative hurdles during the adjustment period may however hamper immediate access. any problems of access to funds held in an agency capacity are expected to be short - lived if the bailout goes through. in any event, the investment activities of the offshore sector are segregated from the local banking system. in the interim, investors in overseas markets should be cautious about the external financial advisers, consultants and cu

one or more coordinators to facilitate international and inter - industry cooperation. the specifics need to be clarified, but you should all be aware of this international initiative, while also recognizing that more work remains to be done in this country to deal with the complex issues that arise from the international and inter - industry activities of these firms. domestic supervision of foreign banking organizations moving now from asia to domestic issues, the international banking act ( iba ) is perhaps the most notable of the laws governing the activities of foreign banking organizations ( fbos ) here in the united states. the iba requires, among other things, that, in order to approve a branch application, the board must determine that a foreign bank is subject to comprehensive supervision or regulation on a consolidated basis by its home country supervisor. this requirement, as you are undoubtedly aware, is commonly known by the initials ccs. i believe that the federal reserve should continue to be rigorous in applying the ccs standard. the board should also take great care in allowing entry into the united states by foreign banks from a country where ccs is not yet in place. in these countries, appropriate conditions could be imposed on the operations of the us branch to help compensate for the lack of full ccs. finally, let me raise an issue that symbolizes our global interdependence : the major challenge of being ready to turn the calendar page on december 31, 1999. as you are all well aware, the federal reserve, as well as the other banking agencies, have a keen interest in the year 2000 readiness of all banks in the united states and overseas. while all banks must address year 2000 readiness issues within their organizations, the issue appears to pose special problems for foreign banks operating branches and agencies in the united states. to address the year 2000 problem for these banks, and international banking generally, the federal reserve is taking an active role in a number of international initiatives, most notably including the joint year 2000 council, which is jointly sponsored by the major international bodies for cooperation between financial market regulators. the joint year 2000 council has made a good start at its task. i am sure that it will continue to raise the visibility of this issue, help all countries recognize the magnitude of the year 2000 challenge, and provide guidance to and assistance for supervisors and financial market participants in understanding the steps they need to take to meet the challenge. i refer you in particular to the council ’ s current paper on guidance to supervisors, which gives concrete steps on assessing preparations by