materialized in 1925, when banco de mexico was created. we cannot underestimate the importance of stability and clarity in the legal foundation of the institutional pyramid, the constitution, which is the cornerstone for sound and sustainable social and economic progress. i am convinced that when a country lacks a broadly shared vision of the future, it cannot enjoy a stable present, as it is continuously pulled into zero - sum quarrels and attempts to backpedal policies. the first dimension of the foundational principles in a national debate includes : the form of government, the transfer of power, and recognizing essential human and civil rights. 1 / 5 bis central bankers'speeches the second dimension relates to the institutional design needed for social, political and economic development. this has been highly elusive for several emerging market countries, especially in latin america, trapping the region in a “ highly persistent slow development equilibrium ”, making it unable to reach the “ underdevelopment escape velocity ”. many factors share the blame in this unfortunate outcome. this shows how difficult it is to endogenously change the incentives and the institutional setup in a rent - driven economy, making it hard to attain an efficient and highly productive incentive - based economy. this mainly occurs because the low hanging fruit for both politicians and economic interest groups is to maintain the status quo, where outcomes are tilted towards favoring incumbents ’ rent extraction, at the expense of the wellbeing of broad sectors of society. this creates societies where effective social mobility ladders are scarce, inequality is perpetuated, and polarization becomes endemic. in this context, politics tends to fall into the short - term trap of exploiting the “ oppressoroppressed ” debate, exacerbating contrasts and deepening polarization, making a shared vision of the future a more elusive goal. we should not forget that constructive politics is the art of finding common ground between different individual interests and the common good. when these objectives are reconciled, societies get closer to their true potential in terms of economic, political, and social outcomes. to attain progress and development, history and experience provide ample evidence in favor of market economies with strong and stable forms of government that provide critical public goods, mainly : i ) the rule of law, ensuring personal security, contract certainty and well - defined property rights. ii ) a level - playing field for all, including equal opportunities to access high quality education and health services for all social groups. iii ) strong incentives for the most efficient allocation of scarce resources,

susan schmidt bies : enhancing risk management under basel ii remarks by ms susan schmidt bies, member of the board of governors of the us federal reserve system, at the risk usa 2005 congress, boston, 8 june 2005. * * * thank you very much for the invitation to speak today. i am particularly honored to be among so many esteemed risk - management practitioners and researchers, including bankers, consultants, academics, and fellow supervisors. i hope that my remarks will contribute to the collaborative spirit of this conference. indeed, i am sure you agree that gatherings such as this are an excellent opportunity to share ideas about developing new techniques and practices, as well as revisiting existing ones. today i plan to share with you some views on the basel ii framework, especially its proposed implementation in the united states. i will first touch briefly upon the broader objectives of the framework, then offer some thoughts about complexity in basel ii, provide additional detail about the risk - measurement and risk - management aspects of basel ii, and close with a short discussion about current implementation issues. objectives of basel ii the release last june of the new international capital framework, often referred to as basel ii, was a major development. it is composed of the now - familiar three pillars : pillar 1, minimum capital requirements ; pillar 2, self assessment and supervisory review ; and pillar 3, market discipline. the major objectives of basel ii include creating a better link between minimum regulatory capital and risk, enhancing market discipline, supporting a level playing field in an increasingly integrated global financial system, establishing and maintaining a minimum capital cushion sufficient to foster financial stability in periods of adversity and uncertainty, and grounding risk measurement and management in actual data and formal quantitative techniques. let me emphasize that last objective, since it is often overlooked. critical to basel ii is the effort to improve risk measurement and management, especially at our largest, most complex organizations. in a general sense, basel ii expands advanced risk - measurement and - management techniques from a set of tools used in an operating and control environment into the basis for making minimum regulatory capital more reflective of risk exposures. since individual organizations employ various types of risk - management techniques, moving to basel ii as a minimum regulatory capital framework requires a certain degree of standardization so that risk measures can be reasonably compared across organizations and over time. from the outset of our participation in the development of basel ii, the u. s. banking agencies have clearly and consistently stated that the final adoption of the new capital rules