develop their own countercyclical policy so as to overcome periods of limited financial market access, preventing domestic variables from being significantly affected. thanks to these policies, the monetary and financial system in latin america as well as in argentina, despite facing a series of turbulences, has managed to operate within the guidelines set. there have been no bank closures, the institutions have kept their robust liquidity and solvency levels, savers have been able to make the portfolio decisions they have deemed fit, credit has kept growing – though at a slower pace. for the first time in several decades, after patiently working for five years, the central bank of argentina has become a true stability anchor, providing three public goods unprecedented in the country : monetary stability, financial stability and foreign exchange predictability. as regards the institutional impact on growth, the literature does seem to have risen to the occasion. the neo - institutionalist school has come to prominence in the past few decades with the spread of its explanatory power. from the very beginning, its founders have sought to answer a fundamental question – why do some nations achieve self - sustained growth, while others remain economically stagnant? neo - institutionalism highlights the role of the historical background. unlike the neoclassical school, it focuses on a dynamic vision. in my opinion, when we talk about economic institutions, the concept of pyramid comes in very handy, and what better place than the mayan and aztec land to make a reference to it. societies build their institutional arrangements in stages, one after the other, one over the other, each on top of the previous one. to keep progressing with this pyramidal arrangement at the regional level, it is essential to develop financial markets in domestic currency. in this sense, there are several important factors, both at the macroeconomic and microeconomic levels. the microeconomic factors include an increasing dedollarization of the economy and reduced vulnerabilities related to potential sudden stops in capital flows. this is particularly important since currency mismatches have been the basis of the major financial crises among emerging economies. a marked reliance on borrowing in strong currencies makes countries more vulnerable to domestic currency depreciation ( which is strongly tightening ). furthermore, the development of finance markets in local currency is usually associated with improved liability management facilitating risk management. among the microeconomic factors, it is key to develop a yield curve in local currency that reflects the opportunity cost of funds for different terms, leading to more efficient resource allocation

through reinsurance, and to have the tools to establish an adequate level of premiums ”. 6. in macao, banks and insurance companies, as a result of innovation in products and services, improved technology and other developments in the industry, have a larger pool of risk management tools and practices available. of course, they are faced with continuous challenges as they manage risk, especially when they need to remain profitable and competitive. however, if financial innovation can be used properly, on one hand, to add value to the customers in terms of products and pricing, and to improve profitability on the other, while identifying and understanding during the process how risk profiles can change as a result, then good risk management can be deemed to have been in place. this complex process falls within the technical expertise of professional actuaries. in fact, professional actuaries are the key players in the process. 7. viewing from a more macro perspective, the volatility of financial markets around the world underlines the imperative nature of risk management in maintaining stability of our global financial system. last year, there were worries over certain financial products, particularly subprime loans related, which might throw international financial markets into turmoil. unfortunately, it has turned out to be a “ cassandra ” one. excess liquidity and recklessness of participants were causing misallocation of resources which would certainly give rise to inflated financial assets and their subsequent bust. last tuesday, the fed announced to cut fed fund rate by 75 basis points to alleviate the battered markets. this action will certainly give short term relief. however, how long the effect will last is still a question. this time, the pain comes not from the cost of borrowing but from the ability to lend. as we all know, gargantuan international banks are writing down the value of their siv ’ s and bringing them back to their balance sheets. such a move has already taken away tens of billions of dollars from their capital which will tremendously weaken their capacity to lend. coupled with their suspicion they have conceived in respect of the viability of their counterparts, we shall witness some stagnation in the lending market for quite some time in the future. such structural retrenchment in liquidity has little to do with cost of borrowing. as a result, there may be continued upheavals in financial markets. 8. as financial institutions offer more sophisticated products and services, there will be more associated risks in their on - going risk management framework. this is