of credit. this high rate of credit extension has become a major cause for concern for the bank. the high levels of credit extension have resulted in record levels of household debt, which have reached levels of almost 70 per cent of household disposable income. the high levels of consumer expenditure have also contributed to the expanding deficit on the current account of the balance of payments. these developments pose a threat to the inflation outlook, and have prompted the monetary policy committee to raise the repo rate by 50 basis points at each of the past two mpc meetings. 7. conclusion in conclusion, there are three points which i would like to emphasise. firstly, the implementation of the new capital accord by our banks will result in the adoption of a globally accepted standard, which will lead to a more transparent risk measurement and better corporate governance practices. secondly, complying with the basel core principles, will ensure that banks are regulated according to international standards. finally, it will be in consumers ’ own interests to take note of local economic trends, such as the recent increases in the repo rate of the bank, prior to incurring new debt. i thank you.

global financial sector are of a macroeconomic nature. these relate to the potential effects of higher interest rates, a turn in the credit cycle and, possibly, associated declines in real estate prices and aggregate expenditure. the current global environment places a premium on system - wide risk management. the report highlights the importance of making available information about risk as well as the interplay, and need for consistency, between financial reporting standards, risk management practices and the overall prudential framework. the south african financial sector is also exposed to these risks and the planned implementation of basel ii by south african banks will strengthen reporting standards and market discipline. 6. the south african banking industry the south african banking system is sound and stable. banks are well capitalised, and the average risk - weighted capital - adequacy ratio for the banking system as a whole was 12, 3 per cent at the end of july 2006. growth in the total balance sheet of banks remained strong during the past year and by the end of july 2006, the total assets of banks – comprising, amongst other things, money, loans and advances, investment and trading position and non - financial assets – had increased by 20 per cent year - on - year, to a level of r1 939, 5 billion. by the end of july 2006, the south african banking sector had recorded year - on - year mortgagelending growth of 30, 8 per cent to a level of r608, 9 billion. this growth was due to a number of factors including lower mortgage - interest rates, a lower level of inflation, lower income - tax rates and an increase in the real disposable income of households. there was also an increase in speculative buying, known as the ‘ buy - to - let ’ boom. real estate prices are currently experiencing a slow - down in growth, which suggests some strong resistance from consumers. consumer spending through credit card lending has recorded year - on - year growth of 38, 6 per cent to a level of r36, 9 billion at the end of july 2006, while the growth in installment - sales debtors has also continued unabated, growing by 18, 8 per cent, to a level of r201, 6 billion over the same period. as the regulator of banks, the bank supervision department of the south african reserve bank will continue to ensure that banks ’ risk - management processes are appropriate for monitoring these activities in the light of increasing household sector indebtedness and the increasing cost