mismatches while failing to build adequate liquidity asset buffers ; • capital, therefore, was inadequate as a buffer against the sharp drop in asset prices, especially a rapid fall in methanol prices ( a major source of dividends for the group ) and plummeting real estate values ; • the interconnectedness of institutions meant that these shocks were propagated across the group, both in trinidad & tobago and the caribbean ; and • cl financial enjoyed the benefits of being “ too - big - to - fail. ” the implicit understanding was that if the group ran into difficulties, the government would step in to prevent a systemic crisis. this made the too - big - to - fail problem even bigger. no one really knew what exactly needed to happen if a large systemically important institution became insolvent. at the end of the day, the decision to either bailout an institution or let it go bankrupt became a political not economic one. my brief discussion has most certainly not fully captured all the details and the complexity of the cl financial crisis. but even this brief overview provides some valuable lessons for shaping our future financial system. we learnt the hard way about distorted incentives, we learnt about a severe lack of transparency, about inadequate capital and liquidity buffers and, most importantly, about the problem of “ too - big - to - fail ”. we must also learn that this failure partly resulted from systemic weakness in the regulatory architecture and partly from excessive risk taking, both in regulated institutions and those outside the perimeter. looking to the future – how to prevent another crisis ladies and gentlemen, as the country ’ s prime financial regulator, the central bank has an almost fifty year record of maintaining the safety and soundness of the financial system. as an independent institution with national responsibility, we are guided by our statutory bis central bankers ’ speeches obligations and by the long - term economic interests of the country. our mandate goes well beyond the medium term horizon of the electoral cycle. only one thing is important : we need to enhance the resilience of the financial system to withstand shocks, no matter from which direction they emanate. the first of the five initiatives we are spearheading to enhance the resilience of the financial system is regulatory reform. regulatory measures / reform many of our financial reforms in the last ten years have been triggered by recommendations made in a june 2004 document entitled “ reform of the financial system of trinidad and tobago : a white paper. ” on the regulatory side

, we saw passage of key legislation to improve oversight by the two main regulators – the central bank and the trinidad and tobago securities and exchange commission ( ttsec ). passage of the financial institutions act ( fia ) 2008 allowed for enhanced supervision of commercial banks and non - banks, as well as strengthened the central bank ’ s enforcement powers. more recently, passage of the securities act 2012 saw adoption of recommendations to improve supervision of the securities market by the trinidad and tobago securities and exchange commission ( ttsec ). while the white paper has served our financial services industry well, it is now dated. crises such as cl financial and lehman, which erupted in the last six years, could not have been anticipated ten years ago when the paper was written. clearly, we need a new white paper on the financial system to provide a new roadmap for the next generation of financial reforms. for this reason, the central bank has been spearheading efforts to develop a green paper on the financial system, as a precursor to the creation of a new white paper. in the insightful words of independent senator the honorable subas ramkhelawan during his december 2012 contribution to the debate on the securities bill, “ financial regulation on the whole is like the building of a fortress, and it is important in the building of a fortress that all the walls must be equally fortified, because the marauders at the gate will always look for the weakest point to infiltrate. ” a major weapon in the building of our regulatory fortress is the insurance bill 2013. new insurance legislation is coming. i want to stress the insurance bill is not in limbo. it is not collecting dust on a shelf in a government office. the central bank has been championing the insurance bill 2013, which is a meaningful and substantial piece of legislation. it contains a modern approach to insurance regulation and supervision, calls for strengthening corporate governance of insurance companies, and establishes more effective protection of policyholders. the insurance bill will address fundamental prudential deficiencies and will include important requirements for insurance companies which are consistent with international best practice. the honourable minister of finance and the economy is expected to lay the insurance bill before a joint select committee of parliament before the end of the year. other regulatory reforms relating to the credit union sector and private pension funds are currently being addressed as the respective pieces of legislation are substantially complete. while regulatory measures will give us a bigger bite, we are approaching the protection of our financial system from various angles. the