4/7  BIS central bankers' speeches  The second occasion came later in 2012 when we had to prevent a self-fulfilling bad outcome that threatened to occur as a result of the sovereign debt crisis. Investors had begun pricing redenomination risk into sovereign debt and interbank markets, as they worried about the possible break-up of the euro area. However, as I said earlier, the pricing of such risk led to a breakdown of money markets, a fragmentation of banking systems along national lines and threatened the unity of monetary policy transmission across the euro area. Moreover, expectations fuelled a vicious cycle. Tightening monetary conditions in countries affected by perceptions of redenomination risk put downward pressure on economic activity, exacerbating the perceived risk. Such moves are a classic example of expectations leading towards an outcome that is non-optimal for social welfare. This is why we announced Outright Monetary Transactions (OMTs) as an instrument that can support our monetary policy. The idea was for the ECB to purchase the sovereign bonds of countries affected by panic-based redenomination risk. By breaking the link between perceptions and downward pressure on economic activity, OMTs would aid in restoring the proper transmission of monetary policy across the whole euro area and support the recovery. OMTs were not used. That the ECB had the tool at its disposal was sufficient to anchor expectations at the “good” outcome. Once unwarranted fears of redenomination were removed, sovereign spreads fell and banks were once again able to raise debt and equity funding.

As we embrace mobile banking, the primary objective of Zambia’s mobile banking framework should be to empower the millions of citizens who do not have access to conventional banking. The essential spirit of mobile banking should be financial inclusion. In this regard, facilitating mobile banking will contribute to the distribution of resources to productive activities such as farming as well as directing resources to areas where there are most needed. In addition the policy framework should be flexible enough to allow the industry players to explore various business models. To this end the National Payment Systems Act of 2007 has provided a platform for businesses involved in mobile banking and money transmission to be designated. The need for effective regulation to ensure a stable financial sector and protection of consumers is vital. Nevertheless, regulation should facilitate and not impede development and must create an optimal, dynamic and agile banking environment. As Regulators we must therefore be open minded to new market solutions while the developers need to constantly engage the regulator in their product development. In stressing the need for effective regulation, I must emphasise the need for providers to observe the mandate and requirements of their licences. Mobile services providers must not perform banking services as this is the domain of licensed banks. Finally, I also wish to stress that mobile service providers and mobile banking solutions developers need to have in place robust business continuity plans that will ensure minimum disruption to services in the event of disasters.