Its objective was to identify issues of legal uncertainty which might give rise to material risks, and to consider how such issues might best be addressed. The Committee seeks to meet this objective, first, via liaison with industry and market participants to identify those areas of legal uncertainty with potentially adverse impacts, and, second, by working with market experts to propose solutions. One area in which the FMLC has been active in recent years is in encouraging the development of a smoothly functioning legal framework for cross-border transfers of intermediated securities. In 2005, the Committee undertook a thorough analysis of the advantages and disadvantages of harmonisation of the private international law in this area, as reflected in the Hague Convention. It was, and still is, widely accepted that such harmonisation would contribute to legal certainty by facilitating a clear identification of the law governing the holding and transfer of indirectly-held securities. This is  BIS Review 77/2007  7  particularly important in the context of the cross-border use of collateral: a key element of banks’ global liquidity management strategies. Early in 2006, the FMLC published a paper that undertook a full analysis of the Convention and expressed strong support for its central propositions. The FMLC’s work in this (and other) areas has been well received and has contributed to the decisionmaking process for government at the national and supra17 national level. Indeed, overall, the Committee has had some notable successes in addressing and ameliorating legal uncertainty in the financial markets context.

BIS Review 110/2007  3  Figure 3: Share of Non-Cash Money in Africa (in%) 100 90 80 70 60 50 40 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 South Africa  Northern Africa (median)  Sub-Saharan w/o SA (median)  How can central banks foster the further development of safe and efficient payment instruments in Africa? First and foremost, central banks must take a leading role in the development, operation and oversight of necessary infrastructure, such as interbank and retail payment systems. In doing so, it would seem natural to take advantage of international knowledge and expertise. As financial sector regulators, central banks can further create a market environment which encourages the entry of new service providers, as well as the development of innovative payment instruments, such as SMS-banking and mobile-banking. As an oversight authority, it is then the task of the central bank to ensure that new payment services adhere to the security requirement desired by businesses, households and financial institutions. 4. Financial sector development  Third, let’s take a brief look at financial sector development. An efficient and deep financial sector provides enterprises with debt and equity to finance their growth, thus spurring economic activity. At the same time a deep financial sector can provide households with savings and credit products to smooth their consumption patterns, again increasing their return from economic activity, and reducing poverty. To what extent have financial sectors grown and become more efficient in Africa in recent years?