have not got involved in step - up mortgages. indeed our variable rate mortgages are always related to future market rates, not to a pre - determined schedule of step - ups in interest rates. the notion of having an enticement rate to lure borrowers in, which steps up sharply two to three years later irrespective of where market rates are at the time, has not been a part of our financial landscape. in our situation higher default rates tend to occur mostly if the job market gets difficult and borrowers cannot service their loans, or, as was becoming the case late last year when high rates of inflation eroded real incomes. fortunately, that should be corrected in 2009 as low global demand will lead to lower inflation rates. in recent times however, the lure of the credit card has become a potential problem. borrowers must be more prudent in accepting the offer of an increasing number of credit cards. in this regard, the central bank has initiated a financial education programme which will include guidance on money management and personal financial planning. this programme was launched last year and will continue in 2009, and will draw on presenters inside and outside the bank. for the moment, however, although there has been an increase in delinquency as noted in the increase in commercial bank provisioning last year, it is within manageable proportions. securitization the policy of originate and securitize taken to its extreme in the case of the us market is also a development that does not exist here. there is limited securitization here in barbados. in fact there is not sufficient securitization. entities which were supposed to be securitizing, that is, issuing commercial paper and money market instruments were issuing certificates that looked very much like deposits. perhaps this is related to the barbadian desire to avoid taking risks, but it shifts the risks on to the institution. in the case of commercial paper, it can be traded and could trade at above or below its value, so that the institution does not bear all the risk. this allows the lender to take his money out at any time – at a price. in the case of deposits the institution has an obligation to return the value of the deposit plus interest at the due date, unless some prior arrangement has been agreed as to early removal. to this extent in the barbados situation with its tendency to deposit - taking, systems are less liquid. however securitization has its merits. it leads

discuss approaches to providing mutual support and to put preventative measures in place over the short to medium term. the use of macroprudential indicators macro prudential indicators have become more important in the current environment. rather than concentrating only on the health and performance of individual financial institutions, macroprudential supervision uses a coordinated approach. this is necessary because financial institutions can influence asset prices, which can significantly affect the health of the economy as a whole. greater emphasis on macroprudential supervision should produce “ early warning ” indicators, and macro - stress testing would serve to verify the resilience of the system. already, regional governors through the caribbean centre for money and finance, are proposing this approach and seeking to fund it. stress testing is also being developed largely because the extent to which market values and liquidity structures in other countries affect us is growing, more so because our economies are intertwined. cooperation from all market participants in this regard can assist in countering the potential procyclicality of regulatory requirements and help us to identify early excessive leverage, risk concentration and the liquidity mismatch. effective cross - border monitoring will require procedures that would ensure that measures aimed at containing risks and vulnerabilities are identified and implemented. for example, in some situations in other jurisdictions it has been useful to have exchanges of currency deposits among central banks. the appropriate balance of responsibility between home and host supervisors is another area that is being addressed. the icelandic bank failures in particular taught us that when there is a problem, rescue procedures and fiscal support are national. it is for this reason that many regulators are requiring that operations be set up by way of subsidiaries. this way their capital requirements are under the authority of the host supervisor. regulation of liquidity new approaches to the management and regulation of liquidity are just as necessary. indeed the regulation of liquidity has been recognised as being at least as important as capital adequacy. financial intermediaries can be faced with liquidity risk. however, the lack of a defined international standard has reflected the extreme complexity of the liquidity risk, and generally applicable quantitative ratios are difficult to identify. effective ways for assessing and limiting the liquidity risks are however important and regulators have already begun to examine the possibility of introducing specific ways of measuring and monitoring liquidity risks. regulation by economic substance my next point relates to the regulation of near - banks. some jurisdictions have already commenced to regulate the financial institutions on the principle that if it looks and