However, performing these activities makes banks vulnerable, in particular receiving short-term deposits and transferring them into long-term loans. At worst, banks may fail and destabilize the whole financial sector and even the whole economy. To avoid such calamities from happening, society is willing, under certain specified circumstances, to rescue banks from failure by providing exceptional lending from the central bank or solidity enhancements from the government. Depositors may be protected by a deposit insurance scheme. But the willingness of the authorities to assist the banks and their customers must be matched by regulation and monitoring to ensure that the bank owners and others do not use, or I might say “abuse”, the possibility of public support to further their own purposes. Hence, there must be some regulation and supervision to make sure that banks behave in ways which are consistent with the overarching goals of society, such as financial stability and consumer protection. Regulation must also provide the necessary incentives for banks to act prudently and in fair competition with other banks and other financial institutions. An adequate level of domestic regulation is also necessary if you want your banks to do business internationally or if you allow foreign banks to do business in India. You should welcome foreign institutions but you should not open your markets to unregulated and unsupervised institutions. Ideally, regulation should be limited to what is really necessary to obtain these overarching goals. In practice, authorities have a tendency to over-regulate since they are risk averse.

Ladies and Gentlemen, it is in this regard that the Bank of Zambia and Professor Collier with the support of the UK Department for International Development partnered to hold this international symposium whose objectives include: (i)  enhancing understanding of advantages of central bank independence among central bankers, Government, banks, non-bank financial institutions, the business community, academics and other stakeholders;  (ii)  drawing lessons and sharing experiences of central bank independence in developed, emerging and developing countries;  (iii)  appreciating the political, economic and legal aspects of operationalising greater independence for central banks; and  (iv)  exploring ways of enhancing fiscal and monetary coordination. Ladies and Gentlemen, the selection of papers to be presented and discussed at this Symposium will provide a platform for sharing ideas required for practical solutions aimed at improving the Bank’s service delivery. As we tackle issues of inflation, exchange rates, and other key macroeconomic indicators, let us use this forum to outline some of the past developments and challenges that lie ahead of us as we aim to taking Zambia’s financial sector to higher heights. Lastly, let me say that while we can all learn from what other central banks have done, each country should establish the legal framework for its central bank, and allow for its evolution, in ways which best fit that country’s own history and institutions. I have no doubt that the symposium will be thought-provoking and highly participatory.