daniel mminele : ten years of inclusion of the south african rand in the cls remarks by mr daniel mminele, deputy governor of the south african reserve bank, at the continuous linked settlement ( cls ) reception to mark ten years of inclusion of the south african rand in the cls, johannesburg, 17 march 2015. * * * good evening, ladies and gentlemen. it is an honour for me to make a few remarks on this occasion of the cls reception to mark ten years of settlement of the rand in the cls system. i am particularly pleased that the cls delegation to mark this key milestone is led by none other than the chairman of the cls board, mr kenneth harvey. we welcome you and your colleagues to south africa, and thank you for coming all the way. the cls is one of those mission - critical systems that can be compared to the plumbing system of a building. just as most of us never think about the plumbing of a building and take for granted that it is there and works, the cls also runs very much in the background of the foreign - exchange market. it is only when there is a leak or a pipe bursts that we realise how important plumbing is. in the context of the cls, if a big pipe bursts and cannot be fixed quickly, this can result in major disruptions to the foreign - exchange market, with potential rapid spill - over effects to the rest of the financial system, which at worst could bring about financial instability on a global scale. as many of you will know, the cls plays a fundamental role in the foreign - exchange market, where it operates the largest multi - currency cash settlement system to mitigate settlement risk for the foreign - exchange transactions of its members and their customers. in its offering, the cls mitigates settlement risk through the provision of its unique payment - versuspayment settlement service which has direct links to the real - time gross settlement ( rtgs ) systems of the currencies it settles. in addition to mitigating settlement risk, the cls also contributes to streamlining and standardising foreign - exchange operations, helping to reduce costs. a foreign - exchange settlement usually requires potentially large cash funding liquidity to settle the obligations of settlement members. these values are materially reduced in the cls system through the multilateral netting of the obligations between member banks to deliver best - in - class liquidity management. as regulatory requirements for larger liquidity buffers

the world remains a risky place, with the financial sector still constituting a major source of fragility. reform processes led by the financial stability board, the g20 and the bank for international settlements are pointing us bis central bankers ’ speeches in the right direction, but progress in implementing these reforms is slow and uneven across major regions of the world. the world has a broad framework to regulate globally - systemic financial institutions but there remain gaps, especially regarding resolution mechanisms when banks fail. a major source of the crisis was the build - up of significant external imbalances. the world has made slow progress in tackling high current account imbalances across the globe, which has spill - over effects on smaller countries. the recent sell - off in emerging markets in response to talk of tapering in the us is an example of how policies in one country, especially one as powerful as the united states, have unintended consequences for other countries. many countries continue to pursue exchange rate policies that distort trade and investment flows. naturally, each country pursues policies that suit its own national circumstances. at times, these policies exacerbate global fragilities rather than contributing to their resolution. the world would benefit from a higher level of coordination and cooperation to limit the spill over effects of domestic interest and exchange rate policies on smaller open economies. the world also needs more robust institutions to reduce the cost of insurance for individual countries as well as to objectively enforce rules and standards, with the aim of reducing future crises. at present, there is a perception that bodies such as the imf apply rules inconsistently, with one set of rules for developing countries and another for advanced economies. south africa, like most other countries, is a member of the imf and it is in our collective interest for this body to be credible, strong and responsive. the paralysis in world trade negotiations has given rise to regional trading blocs and bilateral trade agreements. given the asymmetry in power across the world, such an approach to negotiations is always going to result in a skewed system, biased towards richer countries at the expense of poorer ones. fair and open trade and increased market access for poorer countries to richer ones is essential to reduce the build - up of imbalances. on the african continent, more needs to be done to strengthen the african union. quite a number of countries do not pay their dues, resulting in the organisation being overly dependent on donors. while donations are always welcome,