these exit strategies. this optimistic view envisaged us policy rates being increased by the middle of 2010. there were, however, more pessimistic views which believed ( and some still believe ) that the risk of a double - dip recession was high. the current emerging consensus appears to be that while the risks of a return to negative growth are not trivial, the most likely outcome is for a protracted period of low growth in the advanced economies while the emerging markets are seen as the new growth engine. in essence, we have emerged from the recession, but not from the crisis. the reasons for the poor growth outlook vary across countries and regions. in the united states, the consumer is still deleveraging in the face of a housing market that has not fully corrected, and a withdrawal of the fiscal stimulus. in the euro area, the replacement of private credit and expenditure with state credit and expenditure resulted in a ballooning of fiscal deficits and debt ratios in a number of countries where debt to gdp ratios were already under pressure, particularly in southern europe. greece and italy, for example, have debt to gdp ratios of 130 per cent and 118 per cent respectively. pressure from the markets as well as the conditionalities related to the imf - led bail - out packages resulted in the implementation of austerity measures in a number of countries, and fiscal retrenchment became the order of the day at a much faster pace than was originally thought appropriate. fiscal adjustment in greece is planned to reduce the deficit from over 13 per cent of gdp to around 3 per cent of gdp in 2014, while in spain the objective is to reduce the deficit from 9, 6 per cent of gdp to 3 per cent by 2013. in the uk, government spending cuts for the current fiscal year have averaged 25 per cent across departments. the danger with such an approach is that the adverse impact on growth could set in motion negative debt dynamics which would make the overall debt situation even worse. it has been suggested by desmond lachman of the american enterprise institute, that the greek austerity programme would result in growth contracting by between 15 – 20 per cent, leading to an increase in the debt to gdp ratio to 180 per cent. while there is general agreement around the risks of excessive debt, there is less agreement as to how much is excessive, and how quickly it should be reduced. as george soros has recently argued, the premature pursuit of fiscal rectitude could wreck the recovery. at best

t t mboweni : international regulatory developments and the south african banking sector address by mr t t mboweni, governor of the south african reserve bank, to trainee chartered accountants in the western cape, at the south african institute of chartered accountants, cape town, 2 october 2006. * * * honoured guests ladies and gentlemen 1. introduction thank you for the invitation to address you today. financial markets have become increasingly globalised and our markets are no exception. within this context, regulation according to international best practice, has a big part to play in ensuring the stability of the financial sector. you may be aware the international community has adopted some measures to harmonise the regulation of banks. today i will provide a brief overview of two of these initiatives namely, the new capital accord and the basel core principles, which have been adopted under the auspices of the bank for internationai settlements ( bis ). i will pay particular attention to how these initiatives impact on the regulation of banks in south africa. as future chartered accountants, these developments will have an important impact on your working lives. i will conclude by making some observations on the performance of the south african banking sector. 2. the bank for international settlements many industries and businesses have established associations, whose aims are to conduct research, review important issues and promote the development of these industries or businesses. the bis, established in 1930, could be described as a club or association for central bankers. the bis was established in the context of the young plan, which dealt with the issue of the reparation payments imposed on germany by the treaty of versailles following the first world war. the name of the bis is derived from this original role, and was also created to promote central bank cooperation in general. the reparations issue quickly faded, focusing the activities of the bis entirely on world - wide cooperation among central banks and, increasingly, other multi - lateral agencies in pursuit of monetary and financial stability. today, central banks from 55 countries are members of the bis. the bis fulfils its mandate by acting as a forum to promote discussion and policy analysis among central banks and within the international financial community. it is also a centre for economic and monetary research ; a prime counterparty for central banks in their financial transactions ; and acts as an agent or trustee in connection with international financial operations. the most important meetings held at the bis are the regular meetings of governors and senior officials of member central banks. i regularly attend these meetings which are held every two months in