of the twelve months to april 2012, and despite a hefty selloff in september 2011, the cumulated net purchases amounted to r74, 5 billion. in comparison, the previous calendar - year record in 2006 stood at r34, 3 billion. in recent weeks, the announcement of the possible inclusion of south africa into the world government bond index later this year, has provided some impetus to the local currency bond market and non - resident inflows. this is a positive development as the criteria for inclusion is based on the level of sophistication of our bond markets with regard to size, credit quality and lack of barriers to entry, as well as on its liquidity and a transparent price discovery process. this represents another endorsement of south africa ’ s financial markets as being world - class. other financial assets, however, have experienced a more volatile environment over the past year. equity prices, as measured by the jse all - share index, failed to post any gain over the whole of 2011 despite a recovery in the latter part of the year. furthermore, a continuation of the late 2011 rally into early 2012 quickly lost steam, bearing testimony to continued investor concerns about any speedy return to solid economic growth. in contrast to positive inflows into bonds, net non - resident activity into local equities has resulted in net sales of r25, 4 billion in the twelve months to april 2012. the exchange rate of the rand, while not repeating the wild gyrations of earlier financial crises, has remained vulnerable to shifts in global risk appetite and swings in commodity prices. following relative stability in the first half of 2011, the currency weakened beyond r8. 00 / us $ in september as foreign investors sold domestic bonds, and even the resumption of bond purchases in the ensuing months failed to bring the rand back to its previous range. the past few months have again been a period of moderate volatility, with the rand seemingly driven – as with other so - called “ commodity currencies ” and emerging market currencies – by the countervailing forces of abundant global central bank liquidity, fledgling investor appetite for risk and movements in the eur / usd exchange rate. bis central bankers ’ speeches 4. financial market operations the management of overall money - market liquidity continues to be one of the most important functions of the financial markets department ( fmd ) as part of the implementation of the monetary policy decisions of the mpc. the bank continuously reviews

financial crisis inquiry commission, january 2011. bis central bankers ’ speeches in which they were involved. finally, one cannot ignore the issue of incentives in the financial industry, especially the system of employee compensation, which at some stage heavily rewarded sales volume and short - term profits at the expense of risk awareness and longerterm prudential analysis. there is no doubt that regulatory authorities and financial institutions alike have become more aware of the need for correcting the excesses of the past. back in 2010, the seoul summit of the g - 20 committed to “ core elements of a new financial regulatory framework ( … ) as well as measures to better regulate and effectively resolve systemically important financial institutions, complemented by more effective oversight and supervision. ” this included the endorsement of basel iii rules on banking supervision, which, among others, raised the quality and quantity of bank capital and liquidity, and constrained the build - up of leverage and maturity mismatches. separately, since the global financial crisis, several pieces of legislation have strengthened prudential regulation and supervision of the industry. in the united states, for instance, the dodd - frank wall street reform and consumer protection act gave regulatory agencies increased powers of oversight towards systemically important institutions, while incorporating stricter rules on executive compensation and corporate governance. the volcker rule, introduced as an amendment to the act, was specifically aimed at shielding bank customers from risky behaviour by banks, by seeking separation of retail banking from investment banking and proprietary trading activities. at the same time, financial institutions have themselves taken steps to avoid a repeat of past crises, including a comprehensive review of their corporate culture and practices, with greater emphasis on the need to prioritize customer service. a september 2013 survey of 382 respondents from europe, asia - pacific and north america by the economist intelligence unit showed that nearly all of the respondents felt that ethical conduct was just as important as financial success to their firm, and that 67 per cent had taken steps to make staff more aware of the importance of ethical conduct. furthermore, 63 per cent had introduced or strengthened a formal code for ethical conduct, and 43 per cent had introduced financial or career incentives for respecting that code of conduct. 2 another approach followed by financial institutions was to hire high profile corporate governance specialists that have knowledge of compliance issues in order to transform their institutions, and help them to quickly step up to the required standards of compliance and conduct. if there is one area in which banks are not cutting costs, it is in the