, induced by the steady increase in oil and gas prices, set in motion the evolution of a more sophisticated, more diversified and more complex financial sector which brought with it many benefits. not unexpectedly, it also brought a whole host of challenges, some of which are still to be resolved. let me cite some of the more notable changes that have occurred in our financial system over the past twenty years : • there has been significant consolidation among the banks, with the three largest banks now accounting for 70 per cent of total bank assets ; similarly the three largest insurance companies accounting for three - quarters of the insurance industry. ( the largest insurance company, clico accounts for close to 55 per cent of total insurance assets ). • most banks have greatly expanded their product offerings, functioning as “ universal banks ”, offering in addition to basic banking services, pension and mutual fund management, individual annuity plans, trust services, leasing, brokerage and merchant banking services. in an effort to compete, insurance companies have been issuing deposit - like products and mutual funds. ( clico has led the cross - over to bank - like products ). • to reduce costs and to compete effectively, some of the institutions adopted conglomerate structures. here again, cl financial led the way in terms of the breadth and complexity of its structure. • a fourth significant change in the last few years is the extent of regional penetration by our banks and insurance companies, both through off - shore lending and insurance coverage as well as through shareholding and ownership. of course, the extra - ordinary level of regional penetration brought increased risk and has created special problems in the clico case. • and one last change i would like to mention : you would re - call that in the 1970s and 1980s, we embarked on the “ localization ” of the banking sector. currently, reflecting the impact of what we could broadly call “ globalization ”, of the eight commercial banks operating in trinidad and tobago, six are foreign - owned – a reversal of the localization trend. unfortunately, neither the legal nor the prudential framework kept pace with the rapid evolution of the financial sector. for example, the first upgrade of the financial institutions act since the early 1990s came in september 2006. this was followed by a comprehensive reform of the fia, which was approved by parliament in december 2008. the current insurance act dates back to 1966, with an important amendment from 1980. the next upgrade came a few weeks ago, in the context of the clico crisis. the

economies in the recent tightening cycle points to an increased latitude in managing the impact of the global financial cycle while maintaining some policy autonomy. asean economies weathered the post - pandemic round of interest rate hikes in industrialised economies surprisingly well, avoiding the capital surges and sudden stops they had suffered through during the earlier shocks. what conjunctural and structural factors might explain this apparent improvement? first, the common global inflation shock and resulting synchronicity of monetary tightening across developed and emerging market economies reduced the risk of destabilising capital flows or currency fluctuations. the inflation cycle in asean was also somewhat more contained than in the advanced economies. asean economies reacted to the global inflation shock earlier, and their pre - emptive monetary tightening reined in domestic inflation and reduced incentives for capital outflows. improved communication and orderly transmission of higher policy rates also supported risky asset classes, such as emerging market bonds and equities. 2 second, asean economies had stronger buffers against outflows than in previous cycles. they maintained broadly balanced current accounts and benefited from positive foreign direct investment trends, terms of trade tailwinds and continued recovery in key sectors. with generally strong external positions, asean economies also reduced their reliance on foreign capital, deepening their local currency asset markets and increasing domestic participation in these markets. third, asean economies relied on expanded toolkits to reduce financial stability risks and dampen the impact of the global monetary cycle. over the past few years, most have deployed macroprudential measures to reduce leverage, limit balance sheet mismatches, and discourage the formation of asset bubbles. when regional currencies faced depreciation pressures earlier this year, asean policymakers engaged in discretionary policy management, accepted some currency flexibility, and used targeted foreign exchange interventions and administrative measures to temper currency volatility and capital outflows. extending our perspective to the last 30 years, recent research by mas3 confirms that capital flows to emerging markets in asia – both in debt instruments and more generally – were heavily influenced by the external global financial cycle during the period from 1995 to 2010 – from the asian financial crisis through the global financial crisis. on average, about 45 percent of the variation in capital flows during this period was attributable to external or global factors. however, our research also shows that this influence has diminished over the past 15 years, to the point where a much - reduced 10 percent of the variation in flows can be ascribed to external " push "