these was the economic convergence of member states ; ii ) to make proposals on the institutional framework and structure of the proposed east african monetary union ; iii ) to design a model protocol for the east african monetary union that would form the basis for the monetary union negotiations among the eac partner states ; iv ) to propose an institutional framework for the east african monetary institute which would precede and spearhead the creation of an east african central bank ; and v ) to propose a mechanism for the monitoring and enforcement of the macroeconomic convergence criteria among the eac partner states. honourable members, the monetary affairs committee ( mac ), that comprises governors of eac central banks considered the terms of reference for the study that were approved by the council of ministers. the monetary affairs committee through the eac secretariat engaged the services of the european central bank in 2009 to carry out the study through an internationally competitive bidding process. as you may be aware honorable members, the draft final report of the study on the establishment of the monetary union among the eac partner states was validated in a workshop held in kampala, uganda in january 2010. subsequently, and after incorporating the comments of the validation workshop the final report was submitted and considered by the joint session of the monetary affairs committee, fiscal affairs committee, capital markets insurance and pensions committee held in arusha on march 1, 2010. in our meeting held on march 1, 2010, the eac central bank governors and permanent secretaries from the ministries of finance, trade and eac recommended to the ministers of finance that the study report on the establishment of the eac monetary union, together with all its annexes be adopted as one of the working documents for the east african monetary union negotiation process. honorable members, the committee of permanent secretaries from the ministries of finance and governors of the eac central banks considered a draft road map for the establishment of the east african monetary union. the committee noted the following issues under the draft road map that required detailed consideration ; legal, institutional and regulatory framework ; operational issues and policy direction on available options for establishing the east african central bank. it was recommended that a high level task force ( hltf ) be formed to negotiate the east african monetary union protocol and review the draft road map. the meeting recommended to kick start the process towards an east african monetary union by commencing negotiations on the comprehensive protocol on the establishment of the east african monetary union. this protocol also features the statute of the east african monetary institute and the east african central bank.

staff would obtain and document, before approval of the transaction, complete and accurate information about the customer's proposed accounting treatment of the transaction, financial disclosures relating to the transaction, and the customer's objectives for entering into the transaction. this enhanced due diligence may appear to impose some documentation burdens on the corporate customers of banking organizations, but this information should be substantially similar to the information that corporate customers are providing to their own senior management and boards of directors as part of their own internal review and approval process for complex structured finance transactions. our supervisory reviews indicate that many financial institutions have already taken steps to enhance their internal controls and due - diligence processes in order to filter out transactions with unacceptable levels of reputational and legal risk. as a result, some financial institutions have turned down deals with unfavorable risk characteristics that they may have accepted in the past. while we applaud these developments, we hope that the guidance we are developing will help further improve the awareness, among both banking organizations and their corporate customers, of sound practices in this area. credit risk transfer and conflicts of interest financial market innovation and the development of increasingly complex structures for credit risk transfer also may give rise to legal or reputational risk. in recent years, we have seen considerable advances in the management and transfer of credit risk, including credit default swaps and collateralized debt obligations. these practices and the development of new and more liquid markets have come about because of better risk measurement techniques. they have the potential, i believe, to substantially improve the efficiency of world financial markets through the diversification benefits that credit risk transfer mechanisms can provide. however, the fundamental elements of risk management must be kept firmly in mind if these innovations are to succeed. by their design, credit risk transfer instruments segment risk for distribution to the parties most willing to accept them. a key point, however, is that market participants must be able to recognize and understand the risks underlying the instruments they trade and be able to successfully absorb and diffuse any subsequent loss. another consideration is whether one party to the transaction is entering into the trade with an unfair advantage by virtue of its role as a lender to the same or a related entity. financial firms that have large corporate loan portfolios increasingly have accessed the credit derivatives market to help them manage their risk while continuing to extend credit to corporate customers. while this development has created market efficiencies and investment opportunities, these positive factors have been somewhat overshadowed by concerns that some credit market participants