First, the international consensus to harmonize standards globally appears fragile. If each country acts to strengthen its financial system in an uncoordinated way, we will be left with a balkanized system, riddled with gaps that encourage regulatory arbitrage. Second, I am concerned that the focus will be too bank-centric. Although it is clearly appropriate to strengthen the liquidity and capital standards for banks, regulatory reform needs to be comprehensive. Third, I worry that the Federal Reserve’s role with respect to bank supervision will be unduly constrained. Let me discuss each of these concerns in more detail. Turning first to the issue of harmonization, I think it is underappreciated how important harmonization is to ensure success of the global regulatory reform effort. Without harmonized standards, financial intermediation would inevitably move toward geographies  BIS Review 28/2010  1  and activities where the standards are more lax. This, in turn, would provoke complaints from those who cannot make such adjustments as easily. The political process, in turn, would be sensitive to such complaints, creating pressure for liberalization, which would cause the tougher standards to unravel over time. In the discussion between countries, the emphasis would subtly shift from how to structure the regulatory regime to ensure financial stability toward negotiating a regulatory regime that works best for the institutions headquartered in each particular country. The harmonization process has some momentum due to the sponsorship of the G-20 leadership and the efforts of the Financial Stability Board (FSB) and other international standard setters.
In other words, data on operations for all insurance companies should be captured easily for planning purposes; and  5)  Along the same lines, the insurance companies should focus on their core-insurance business, as this has the effect of reducing outflow of capital. If insurance companies had an avenue for co-operation amongst themselves, some arrangements to compensate for fore-gone income on ceded commission could be worked out under the co-insurance programme. In this regard, I call upon my counterparts at the Pensions and Insurance Authority (PIA) to strictly supervise the industry in order to ensure, among other things, the proper investment of the insured funds. On our part as the Bank of Zambia, we would like to assure you of our continued support, and our doors are open for consultations. As I do not want to take much of your leisure time, I wish to conclude by thanking you, once again, for according me the opportunity to share my thoughts with you. To this end, I wish you all a Merry Christmas and profitable New Year. Please, have a pleasant evening! I thank you. 2  BIS Review 74/2004