ability to use financial services, which involves a certain level of financial literacy. the sarb has not been actively driving financial inclusion, but it has done some work on financial literacy. going forward, financial inclusion will be an ancillary objective for the prudential authority in terms of the financial sector regulation bill. derisking and deglobalisation contribute to global financial market fragmentation and could end the open and integrated structure we are all striving for. derisking can create financial exclusion. digital innovation can also be used to enhance global financial inclusion. a peer exchange between countries and regions on emerging policy practices for achieving digital financial inclusion could help those who lack access to financial services to better steer their implementation efforts. we believe that the global phenomenon of derisking through a decline in correspondent banking services requires priority and expedited action. this is one area where proportionality in the implementation of regulatory reforms is very appropriate. evidence reveals that the picture is especially bleak in the sub - sahara africa region where some countries are constrained since they are potentially unable to process payments across international borders. to date, a limited number of correspondent banking relationships with south african banks have been terminated but derisking has not had a significant impact on crossborder flows from a south african point of view. however, south african banks are being subjected to heightened scrutiny by foreign counterparts. markets in all jurisdictions must have access to a well - functioning global financial system in order to develop and prosper. this development goes straight against our goal of financial inclusion, which is a critical element for long - term global economic growth and for the elimination of poverty. in conclusion, the fact that the south african banking sector remains profitable and adequately capitalised is not a cause for complacency. the future performance of the domestic banking sector could be adversely affected by a number of factors, including constrained household - sector balance sheets, a weak domestic economic growth outlook, the subdued global growth outlook, the effects of the threat of a sovereign downgrade, and increasing regulatory compliance pressures. as a regulator, the sarb will remain vigilant in monitoring and, where possible and appropriate, mitigating the impact of the challenging environment in which domestic banks are operating. thank you.

that should deliver longer - term benefit to the financial system as a whole – standardising, simplifying and publicising the data should all reduce the mechanical reliance on third party judgments and the counterparty can meet the margin call by either providing more collateral, substituting some of the existing collateral with higher quality assets which receive a smaller haircut, or returning some of the lent funds. the aim would be for the bank ’ s risk tolerance to be broadly the same for loans as for a securitisation of those same loans, so as not to provide incentives to submit one form of collateral over the other. bis central bankers ’ speeches models, and hence reduce “ single points of failure ” within the abs market ( although it will be up to market participants to make best use of these changes ). other policy issues on the agenda there are some big issues facing the bank and its collateral management going forward. the immediate challenge is to wind down the sls to its conclusion in january 2012. the banks have made good, early progress in reducing their use of the scheme, unwinding the collateral swaps ahead of their contractual maturities. as the remainder of the t - bills lent are returned, the collateral pledged to the bank will be returned to these counterparties for refinancing in the market. much of the collateral posted under sls was rmbs and residential mortgage - backed covered bonds, where conditions in the secondary and repo markets have improved since the financial market seizure beginning in 2007. it is expected that the banks will be able to generate liquidity using their mortgage assets in the private market or by raising funding through other markets. it is noteworthy that the private sector has recently engaged in sls - like transactions ; pension funds have been agreeing to swap highly liquid gilts for less liquid rmbs. the pension fund, as a buy and hold investor, is content to hold a less liquid asset on repo for a higher yield. the bank in the meantime receives a highly liquid asset that can be used to raise cash in the repo market, or held as part of their liquid asset buffer. it will be interesting to see how that private sector collateral upgrade market grows and develops and, in particular, the increased transparency helps pension funds better manage the risks in the collateral. conclusion when people think about bank of england policy questions, many rush to focus on interest rates and, given our new responsibilities, financial policy decisions. fewer think about the policy issues associated with implementing those decisions