self - interest may well color the information they are giving you. in a bank - dominated financial system, the critical information would have come from fellow bank regulators with whom we had been working or from the institutions we collectively had been examining for some time. in a world of financial institutions with a presence in many lines of business crossing national boundaries, obtaining such information, developing cogent analyses, and deciding on a course of action in a crisis requires widespread cooperation among many disparate agencies. moreover, i should note that, even for possible bank - centric crises, the financial landscape in the united states has changed. the large bank holding companies are involved in a myriad of businesses that cross a multitude of regulatory boundaries. in addition, any future financial crisis that does involve a large, complex banking organization might need to grapple with the “ systemic risk exception ” that was passed by the congress in 1993, which requires the boards of the federal reserve and of the federal deposit insurance corporation, the secretary of the treasury, and the president to act jointly. establishing the needed coordination across many agencies could potentially create delays during a time when quick action is needed. moreover, different regulators can have different supervisory philosophies. these potential impediments to a timely response suggest that regulators need to be discussing the possibilities associated with financial crisis on an ongoing basis and long before an actual event. these discussions should encompass the possible actions that might be needed and the information that should be on hand to shape those actions in the public interest. reducing the odds on financial crises this brings me to my final and most important principle - - an ounce of prevention is worth many pounds of cure. as we ’ ve seen in recent years, macroeconomic stability has not forestalled large and unexpected movements in asset prices. shocks occur, or reality catches up to unreasonable expectations, and market prices adjust, sometimes very substantially and suddenly. and although the financial system has become more resilient to such unanticipated developments, it is still subject to bouts of increased uncertainty that could build on themselves to disrupt the normal functioning of markets and send asset prices further away from fundamentals, with potentially adverse implications for the economy. drawing on our experiences, the federal reserve has been working with other regulatory agencies and the private sector both here and abroad to strengthen the financial system in order to lower the odds that a sharp change in prices or questions about a major market participant would lead to a systemic financial crisis. our collective efforts have been in

to a more liquid market where money moves more quickly. in times where liquidity is needed rapidly, thinly securitized markets have their downsides, though they tend to be more safe and less volatile. in such cases the strength of the balance sheet is more important than changes in the market value of deposit institutions. all the balance sheets of financial institutions that i have seen show solvent institutions so though this is not the only relevant factor, we start with an advantage. risk management risk - taking is a necessary element in conducting business, and effective risk management systems, together with good governance strong regulation and supervision all serve to mitigate risk exposure. supervisors instil market discipline by employing strong licensing criteria that ensure the fitness and propriety of directors and executive officers. we should not use the opportunity of these hiccups to remove ourselves from risk - taking. we need to take well considered risk. it is part of the growth process. enforceable guidelines ( e. g. corporate governance, operational risk management and capital adequacy ) and regulations must be supported by effective ongoing monitoring of risk exposures and monitoring for compliance with legal requirements. sometimes legislation is necessary to ensure that supervisors have the needed powers of enforcement to intervene at various stages where infractions may be detected so as to avoid escalation of the problem. both the central bank of barbados and the supervisor of insurance possess legal powers to conduct inspections of their licensees. in some cases the strength of the oversight in the non - bank sector needs to be enhanced as was mentioned in the last financial sector assessment programme report. capital controls in the barbados situation, capital controls have served us well. they serve to control and monitor cross - border financial transactions. further, entities that are licensed under the financial institutions act, cap 324 are additionally subject to credit exposure restrictions relative to capital – that is levels on lending to a single person or group. where these are below acceptable levels, licensees are given specified time periods to have them corrected. this is a key credit risk control and is monitored on a quarterly basis using prudential returns submitted by all central bank licensees. institutions are not always perfect, breaches can be corrected and the earlier the better, but it must be done in an orderly fashion. a disorderly correction is to be avoided. consolidated supervision consolidated supervision of financial groups necessitates collaboration at different levels. memoranda of understanding among all domestic regulatory agencies are key in facilitating information exchange and collaboration. there