marion williams : the nexus between regulation and compliance and the financial meltdown of 2008 address by dr marion williams, governor of the central bank of barbados, at a compliance education seminar, hosted by the barbados international business association ( biba ) in association with the institute of chartered accountants of barbados ( icab ), bridgetown, 9 july 2009. * * * first let me congratulate icab and biba for having the foresight to hold this seminar. the topic of compliance is a very relevant one in today ’ s environment where it has been forcibly brought home to professionals across the globe the need to be vigilant in their activities and to guide clients in the direction of prudence and care in operations. i will touch briefly on three aspects of the nexus between compliance and regulation in the context of the global financial problems. adequacy or inadequacy of financial guidelines and rules, observance of operational rules and appropriate codes of behaviour. compliance and appropriate regulation must go hand in hand. that is, we must first ensure that our rules and guidelines are relevant and effective. we must then ensure that compliance with them is observed. having accepted that, we must however concede that the current global financial crisis which started in the us was not a result of non - compliance. in the case of the sub - prime crisis, other deficiencies were more important. the bis in its annual report notes that these deficiencies include “ problems with incentives, flaws in techniques to measure, price and manage risk and the corporate governance structures used to monitor it, and failings of the regulatory system ”. they suggested too, that there was a willingness to mistake the complexity of the system for sophistication and that historical performance was being relied upon to measure price and manage risk. given that the past is not always a good guide to the future, particularly in an environment where new techniques and instruments were constantly being introduced, this was a serious error in judgement. the problems in the international financial markets of 2008 have taught us many lessons. the most important lesson is that changes in the regulatory environment must keep up with changes in the financial landscape, in terms of instruments, institutions and approaches to the delivery of financial services. firstly, the financial failures of 2008 which followed the sub - prime crisis clearly illustrated the need for a wider coverage of the financial sector beyond commercial banks and for stricter coverage of the financial entities which actually were regulated. in terms of the existing regulations, capital criteria were

, while seeking to understand the inherent risks so as to acquire clear approaches to containing these risks. in this regard, the bank of england ( boe ) has been in the vanguard of the evolution of digital currency. in march of this year, the boe launched its fintech accelerator programme which aims to share developments, trends and insights, to ensure that the boe is engaged with different fintech firms and to enable firms with an interest in fintech to network with a view to supporting the development of the sector. to this end, they recently tested 3 / 5 bis central bankers'speeches the use of distributed ledger technology, which aims to make cross - border payments and the movement of currencies more immediate. the boe has also collaborated to test an artificial intelligence system that allows for detecting abnormalities in financial transactions and for analysing the quality of regulatory data input, as well as recently disclosing its forthcoming version of a real - time gross settlement ( rtgs ) payment system that will be compatible with distributed ledger technology. this mode of experimentation by central banks is reflected across the globe. in china research and trial runs on the prospect of issuing its own digital currency have not only been conducted, but a digital currency institute has been established with a research focus on the use of distributed ledger technology and fintech. of note, a recently published bis study posited the view that whereas cash is the only means by which the public presently holds central bank money, in the future central banks will probably have to decide whether to issue retail or wholesale central bank cryptocurrencies. the cambridge centre for alternative finance indicated that 20 percent of central banks surveyed expect to be using blockchain technology by 2019. if central banks issue cryptocurrencies, it allows the public to hold these liabilities in digital form. this raises the concern of universal accessibility and whether central banks ’ settlement accounts should remain available for a limited set of entities, namely banks, or more widely accessed by individuals? beyond these types of decisions, the consensus by the major central banks that have tested these operations is that distributed ledger technology is not yet mature enough for current adoption. furthermore implications for monetary policy, payment execution and net clearing and settlement – are yet to be fully assessed. in reality, no one yet knows what the social and economic payoffs to these realities will be. it is conceptually interesting to fathom an alternative future, such as one in which there is complete disintermediation of