remarks by daniel mminele, deputy governor of the south african reserve bank, at the annual financial markets department cocktail function pretoria 4 april 2017 good evening, ladies and gentlemen. it is once again that time of the year when we welcome you all to the annual cocktail function of the financial markets department of the south african reserve bank ( sarb ). thank you for accepting our invitation and joining us tonight. introduction as you are aware, the main idea behind this function is to create a networking opportunity between sarb staff members and other market participants in order to facilitate an exchange of views on financial market developments in a more relaxed environment. this annual event also provides an opportunity for us as the central bank to convey our appreciation for the cooperation we have been receiving from market participants over the past year, both in the execution of open market operations and when we conduct financial markets research to enhance our understanding of market dynamics. these interactions are crucial for our role in the financial markets as we seek to give effect to the monetary policy stance which underpins the execution of our price stability mandate. page 1 of 9 my colleagues in the financial markets department remind me every year that this is not the occasion to deliver my ‘ speech of the year ’ but that i am merely a curtainraiser to the main event, namely conducting ‘ special ’ liquidity management operations. in welcoming you to the sarb, allow me to make a few remarks to take stock of the recent developments in international and domestic financial markets and their implications, last year ’ s cocktail function being the reference point. before i conclude i would also like to touch briefly on market conduct issues. i will try and heed the advice that franklin d. roosevelt once gave : “ be sincere, be brief, be seated. ” developments in global financial markets since the previous cocktail function, policy uncertainty has come to dominate price action in global financial markets. among other things, this is due to what marvin barth has called the ‘ politics of rage ’ 1, referring to the rise in anti - globalisation sentiment, populist rhetoric, and countries increasingly turning inward. while an element of this uncertainty may have diminished, at least as far as the election outcomes in certain parts of the world are concerned, the outcomes themselves have ushered in a period of unusually high levels of uncertainty as regards policy direction, the timing with regard to the adoption of policies as well as the likelihood of successful implementation. the risks stemming from the possible election outcomes across europe this year appear to be

however, appreciate somewhat and was at levels of around r13. 55 to the dollar earlier this afternoon. the r186 yield also lost most of the gains it had made last year and is now trading at just above 9. 0 %. the 12x15 fra is back to 7. 49 %, implying an unchanged repo rate for next year. financial markets will likely need more time to fully process the recent political events and their economic consequences. it remains to be seen whether the recent market developments represent a reassessment or a repricing of the south african credit. it is similarly too early to draw any firm conclusions on how these developments will affect sarb ’ s own inflation forecasts. the mpc has previously cautioned that, should some of the factors which had contributed to a more favourable outlook reverse and undermine the inflation outlook, it may reassess its views ; the mpc stands ready to respond appropriately in line with its mandate should the need arise. yesterday ’ s decision by s & p global ratings to lower south africa long - term foreign currency sovereign credit rating to sub - investment grade, with a continuing negative outlook, is a serious setback for the country. we will now need to redouble our efforts in providing assurance and communicating continued commitment to sound macro - economic policies and their consistent and predictable implementation, so as to reverse the current ratings trajectory. this will require a continued collaborative effort between government, business and labour to boost domestic and international investor confidence. page 6 of 9 market conduct developments before i conclude, let me touch on an issue that has been receiving some attention recently. while it is true that traders and investors need to continually evaluate the fundamental drivers of asset prices, the behaviour of market participants should always meet the highest conduct standards. ensuring and continuously promoting adherence to high standards of ethical conduct is an integral part of contributing to the efficiency, integrity and reputation of our financial markets. the competition commission of south africa has referred for prosecution to the competition tribunal allegations of collusive and therefore unlawful practices among certain financial institutions in their foreign exchange trading operations involving the rand. as stated previously, the sarb views these allegations in a very serious light and is of the view that those found to have violated the law should accept full responsibility and bear the consequences. however, it is also important that we do not jump to conclusions and allow the steps now initiated to be completed, following due process. building on the review of foreign exchange operations of local authorised dealers