This unfavourable development is partly a consequence of reduced earnings from copper exports arising from the fall in copper prices as reflected in the lower supply of foreign exchange on the market by mining companies. For instance, the supply of foreign exchange to the market by mining companies has declined by 35.7% to a monthly average of US $ million in the first half of this year from an average of US $ million in the last half of 2008. Further, the weakness of the local currency is a consequence of increased risk aversion to emerging and developing economy financial assets, as stated earlier, attributed to the deepening global financial crisis. In this regard, the supply of foreign exchange by foreign portfolio investors for the purchases of Kwacha financial assets, such as Government securities and domestic company equities, has significantly declined, with most nonresidents preferring to liquidate their investments and externalising the foreign exchange. The result of this is the volatility in the exchange rate of the Kwacha against major foreign currencies. In the last quarter of 2008, the Kwacha depreciated by 26.9% to trade at an average of $ (BoZ mid-rate) from an average of $ in the third quarter. It should also be noted that the depreciation of the Kwacha against major currencies partly contributed to higher inflation, particularly as Zambia remains dependent on imports for a wide variety of consumer goods as well as inputs for domestic production. Further, this unfavourable development has a strong role in shaping inflation expectations.

Behaviour and culture influences operations at almost every levels within an organisation, ranging from decision making, strategic positioning, as well as risk appetite and risk taking. The risk-reward incentive structure has to focus more on long term gains rather than short-term profits, and the design of compensation scheme should fully reflect that aim. The strong culture of risk awareness and good governance should be rigorously instilled such that it becomes organisational culture and natural behaviour of bankers. Culture of transparency along with proper check and balance also contribute towards a solid foundation of banks’ immune system. The other area of immunity that will be key for financial institutions is immunity against cyber security risks. Everyone, every bank, every system must be prepared and ready to both prevent and respond effectively to cyber security risks. Incidents of cyber attacks, no matter how small, can undermine the integrity of the financial system. To boost the immune system, it is imperative that cyber resilience and cyber security be given the highest priority. Ladies and gentlemen, Financial stability could not exist without social stability, which brings me to my third and last point that requires collaboration from financial institutions. The economic benefit of growth has to be inclusive and financial system can play significant roles in promoting inclusive growth, starting with financial inclusion. The people at large must have access to basic financial products including payment, savings, credit, and insurance. The pricing has to be lower, choices wider, and access better.