, because they will be closely based both on national realities and international best practice. this emphasizes the need for close and continuous consultation in each country between the suppliers of payment services and the central banks as the overseer and regulator of the systems. the ultimate target of these consultations is to ensure the easy availability in each country of a payment system that meets the needs of its users, that enables the suppliers to cover their costs, and that does not absorb an excessive proportion of the national resources. that is why many regional payment system development initiatives have sprung up over the last few decades. for example, south african development community ( sadc payments initiative – 1996 ), the western hemisphere payments initiative ( 1999 ) ; the commonwealth independent states payments initiative ( 2004 ) ; and the arab payments initiative ( 2005 ) are some of the well functioning regional payment initiatives. the common objective of all these efforts is to identify possible measures for improving the safety, efficiency and integrity of the regional payment systems. 7. 4 the most demanding factor, common to all, is the rapidly changing global payment system infrastructure that is challenging the existence of domestic and regional payment systems, which are lagging behind. given the increasing sophistication of cross - border transactions, the need to mitigate risks involved in using outmoded infrastructure has to be given priority. the saarc payment system development strategy should therefore be designed to cater not only to the region ’ s present needs, but also its future demands. 8. how does the saarc payments initiative work? 8. 1 let me briefly set out the proposed institutional structure of the saarc payments initiative. 8. 2 by consensus, hon. governors of the saarc central banks requested the central bank of sri lanka to take the lead in this effort. we are happy to be the catalyst and promoter, but hope that at an appropriate time, this initiative will be driven by the other saarc member central banks. in consultation with the saarc governors, we have already appointed a saarc payments council ( spc ), which is composed of the chairpersons of the national payments councils ( npcs ) in each of the saarc member countries or by senior officials appointed by the governors of central banks in countries which do not have npcs. the npcs or payments committees will coordinate and liaise with all stakeholders in the payments area, in particular, banks and financial institutions, stock exchanges, securities traders, stock brokers, service providers,

ajith nivard cabraal : foreign exchange reserve management inaugural address by mr ajith nivard cabraal, governor of the central bank of sri lanka, at the saarcfinance seminar on foreign exchange reserve management, organised by the centre for banking studies of the central bank of sri lanka, colombo, 15 august 2008. * * * deputy governors, director of the cbs, my dear friends, 1. i am pleased to participate at the opening ceremony of this saarcfinance seminar on foreign exchange reserve management. i also welcome all participants to this course and extend to the participants from the central banks of our neighboring countries, our resource persons from bis, deutsche bank group, citigroup and reserve bank of india, a very warm welcome to our country as well. 2. at the 17th saarcfinance governors ’ meeting held in washington in april 2008, it was decided to organize a seminar in foreign exchange reserve management. it was also decided that the centre for banking studies ( cbs ) in sri lanka, with its over 26 years of experience in training and developing financial sector professionals, together with the international operations department of the cbsl, should host this seminar, so as to provide a forum within the region to discuss the latest challenges facing the managers of sovereign reserves at present. 3. my dear friends, foreign exchange reserve management has gained increased importance in central bank activities in the recent past, due to two factors. firstly, due to the phenomenal rise in reserve holdings of central banks, in our region, and secondly, due to the intensive public scrutiny that reserve management has attracted as a result of the significant increase of foreign reserves in the national wealth of countries in our region. the drivers of this sharp rise in reserves are many. high commodity prices, increase of exports of natural resources, and increased remittances, have been among the main contributors to this situation. consequently, many countries have been able to systematically accumulate large foreign exchange reserves over the past few years, and, in a way, reserve accumulation is now possible, not only for the wealthy industrialized countries, but for the so - called developing countries as well. 4. however, these reserve accumulation has not been without pain. in fact, developing countries, being those still requiring improvements in their domestic infrastructure and other systems, have found that the increasing of their foreign exchange reserves has resulted in a huge opportunity cost. this is particularly so because the funds collected in the form of foreign exchange have