displayed by our finalists. if those presentation are anything to go by, the future of central banking and monetary policy in south africa will be in good hands. you can see snippets of their presentations in a video that we will play at the end of the event. i would like to pay special tribute to all the teachers who supported the learners. we are aware that you invested a lot of effort and hard work into this project. congratulations to schools whose learners reached the final stages of the competition. your support and encouragement exposed learners to a rare experience that will leave an indelible mark in their memories. we salute both the teachers and principals for making a difference mpc challenge objective achieved the main purpose of the mpc schools challenge is to promote interest in economics and deepen the understanding of monetary policy. the quality of your essays and presentations is evidence that the objective of expanding the understanding of monetary policy is being achieved. to our learners, remember that nothing of value comes without an effort. your presence here as finalists bears testimony to your commitment, hard work and dedication. we encourage you to pursue careers in the field of economics and central banking. to the judges, moderators, markers, economists and the mpc schools challenge core team, congratulations on a job well done. thank you.

created by taxpayers ’ implicit guarantees and therefore making the bail - in threat more credible ex ante. more equity reduces the likelihood of distress and insolvency, and therefore the likelihood that a situation occurs in which a bail - out is inevitable. this, in turn, makes the bail - in threat more credible ex ante. with higher equity, the unity of risk - taking and liability is restored. furthermore, with higher capital requirements, banks have lower incentives to become “ toobig - to - fail ”. thus a natural tendency to become smaller and less interconnected might evolve, again making the bail - in threat more credible ex ante. if capital requirements are higher, not only the probability of failure is reduced markedly, but also shareholders and creditors would bear more of the losses incurred by the bank. thus banks can no longer benefit from their former “ too big to fail ” status by borrowing cheaply. here i can see many practitioners objecting on the grounds that capital is too scarce and too expensive. in this line of reasoning, shareholders have a certain expectation about the return on capital. if the equity share is increased, other things being equal, expenditures are greater than in a situation with higher borrowed capital. the crux of the matter is this : all other things are not equal. this is because the required return on capital contains a risk premium. and the risk premium falls if the capital is increased, which means that the entrepreneurial risk is spread over more capital. there is no way around the fact that the risk premium and the required return on capital should go down if the capital share goes up. explicit and implicit guarantees for systemically important institutions as well as tax subsidies for loan capital mean that borrowing is eventually being subsidised. from the point of view of a big bank, loan capital becomes cheaper than equity capital. is the practitioners ’ view that equity capital leads to higher costs therefore right in this context after all? no, because the implicit guarantee on loan capital means that, in the event of a crisis, the costs are transferred to the general public or, in other words, the taxpayer. this bis central bankers ’ speeches results in a disconnection between individual and social costs and benefits, as was pointed out by the german council of economic experts. there is fallout from this, of course. it sets the wrong incentives. it favours highly leveraged business models. it gives an excessive stimulus to risk - taking. in short, it creates moral