A significant development relating to the Zambian financial sector was the decision to relocate the function of the Registrar of Banks and Financial Institutions to the Bank of Zambia from the Ministry of Finance and National Planning where it was previously located. This decision was taken in an effort to enhance regulatory oversight of banks and financial institutions starting from the licensing stage. Currently, all applicants have to be evaluated in line with relevant provisions of the Banking and Financial Services Act (BFSA) and international best practice such as the Basel Core Principles on Effective Banking Supervision. The intention is to ensure that only applicants who meet these stringent criteria enter the financial system in Zambia. This is crucial for fostering confidence and stability in the financial system. Mr Chairman, you may be aware that in the early stages of the reforms, a number of commercial banks faced serious problems and were subsequently liquidated. The closures were in part a consequence of the reforms. The reforms also highlighted some weaknesses in corporate governance arrangements at most failed banks. However, following improvements in the regulatory and supervisory frameworks, no bank closure has been recorded since 2002 and the banking sector has recorded significant growth. The growth in the sector can also be attributed to prudent fiscal and monetary policies aimed at achieving sustainable macroeconomic stability. This has been accomplished under a stable political environment and liberalised market conditions.

In Norway, this was a breach in the approach whereby monetary policy and exchange rate policy had been oriented towards strengthening the internationally exposed sector. Deteriorating competitiveness due to high wage growth would no longer be remedied by means of devaluations. This is clearly indicated in the following quotes from the Steigum Commission which submitted its report in 1988. “If international inflation is low and stable, such an exchange rate policy will contribute strongly to price and wage developments in Norway that are also favourable, assuming that the value of the krone is not gradually devalued.” “If a fixed exchange rate rule is to be credible, the authorities must also refrain from using (devaluations of the krone) in the current economic policy when weakened cost competitiveness leads to a decline in output and employment.” With increasingly mobile capital, it became gradually more difficult to maintain the fixed exchange rate. Small differences in interest rates could result in substantial capital flows and monetary policy easily became pro-cyclical. That fiscal policy dampened fluctuations in the domestic economy and that wage growth was held at bay were not sufficient grounds for a fixed exchange rate either. Currency speculation could be self-fulfilling because interest rate increases that were necessary to counter an attack on the exchange rate could trigger such a low level of activity that confidence in the fixed exchange rate was pulverised. In Norway, the fixed exchange rate regime was abandoned in December 1992. There had been persistent unrest and widespread speculation in European currency markets.