Ladies and Gentlemen, in recognition of the need to provide a conducive regulatory environment which promotes sustainability, accountability, transparency and growth of the building society industry in Zambia, the Building Societies Act was amended in October 2005 to harmonise it with the Banking and Financial Services Act pending the modernization of the Building Societies Act under the Financial Sector Development Plan law reform programme. Ladies and Gentlemen, Bank of Zambia is concerned about the levels of lending interest rates charged by most financial institutions in Zambia, building societies included. With the achievement of relative macroeconomic stability in the recent years as evidenced by a significant reduction in the inflation rate to 11.1 percent as at June 2007, it is the expectation of the Bank of Zambia that all prudent lending institutions would make downward adjustments to their lending interest rates to make financial services accessible and affordable. It is also important to note that high lending interest rates can lead to high levels of delinquency. Ladies and Gentlemen, it is in this light that we anticipate that credit referencing services will help in reducing credit risk through the provision of widely accessible information on the loan repayment profile of borrowers. This should also provide another incentive for lowering of interest rates. Ladies and Gentlemen, in conclusion I wish to state that the Bank of Zambia is committed to broadening and deepening the financial sector through effective implementation of the Financial Sector Development Plan.

For publicly listed companies, there is the market discipline of the share price taking a beating for any perceived shortfalls in financial governance. Unfortunately, history is replete with incidences of the failure of such checks and balances, including the repeated failure of markets to impose financial discipline on corporations. Notable examples of the failure of corporate financial governance include the Carrian Group in 1983, Enron in 2001, Worldcom in 2002, and the numerous examples from the recent financial crisis. The narrow fixation on profit maximisation has, in many cases, led to the  4  Source: https://www.regjeringen.no/en/topics/the-economy/the-government-pension-fund/market-value-of-thegovernment-pension-f/id699635/. 5  Source: https://www.mti.gov.sg/AboutMTI/Documents/app.mti.gov.sg/data/pages/507/doc/ERC_Comm_MainReport_Part2_v2.pdf, page 77. BIS central bankers’ speeches  5  misallocation of resources, including the channelling of funds towards unproductive activities for purposes of rent extraction and speculation. This harms economic growth as productive segments are under-invested in. The functioning of markets also needs to be improved. Given the widespread abuse and attempts at manipulation, I believe that appropriate regulations, and their enforcement, can help to ensure that markets function as intended, and support the greater good of society, rather than just the greed and self-interest of the market participants. There is one final aspect of corporate financial governance I would like to mention, and this has to do with what I consider to be one of the biggest threats to future economic growth – environmental sustainability.