caleb m fundanga : international financial reporting standards for banks and other financial institutions speech by dr caleb m fundanga, governor of the bank of zambia, at the official opening of a workshop on “ international financial reporting standards for banks and other financial institutions ”, organised by the bank of zambia in conjunction with the zambia institute of chartered accountants, lusaka, 17 february 2005. * • the chief executive, zica • distinguished resource persons • distinguished participants • ladies and gentlemen, * * i wish to welcome you all to this important workshop on international financial reporting standards ( ifrss ) and international auditing standards, ( isas ) organised for finance officers and auditors from commercial banks, non - bank financial institutions and the bank of zambia. this workshop is organised by the bank of zambia in conjunction with the zambia institute for chartered accountants ( zicas ) out of the recognition that the international financial reporting standards ( ifrss ) and international auditing standards ( isas ) are critical not only to the integrity of our financial system, but also to the bank of zambia ’ s efforts of ensuring effective supervision and regulation of banks and non - bank financial institutions. as you may be aware, three important factors have heightened the relevance of accounting and auditing standards to bank supervisors. these, include : • first, ifrs and isas are a set of high - quality, transparent and globally renowned accounting and auditing standards that the financial stability forum ( fsf ) has included in its 12 key standards for sound financial systems. the standards are, without doubt, likely to make the greatest contribution to reducing vulnerabilities and strengthening the resilience of our financial system ; • second, the adoption of ifrs is expected to result in higher quality reporting of the health of the financial institutions in zambia. by so doing, zambia will benefit from quality international research on accounting and finance issues and also benefit from cross - border comparability of financial performance and condition amongst banks and non - bank financial institutions ; and • third, the use of ifrs is expected to play a critical role in the implementation of risk - based supervision of financial institutions in zambia. ladies and gentlemen allow me, at this juncture, to inform you that in the recent past, the bank of zambia has streamlined the supervision of banks and non - bank financial institutions to make it more focused on risks. this is aimed at encouraging banks and non - bank financial institutions to implement sound risk management practices that provide for : • active oversight

collaboration among all stakeholders. ▪ prospects in the medium to long - term are very positive. need to continue with the reform process can hardly be overemphasised. state of the local economy ( cont. ) status of debt service ▪ in quarter 1 of 2024 debt service was only to multilateral and plurilateral institutions. ▪ in the second quarter, there was a sharp upward jump following the conclusion of restructuring of the commercial ( eurobond holders ) as broader debt service resumed ( see chart below ). liquidity risk secondly, the industry ’ s concerns on liquidity risk is noted. however, it is important to fully appreciate the context that informed boz actions. ▪ the environment has for sometime now been characterized by strong underlying inflationary pressures, stemming not only from the debilitating drought shock of 2023 / 24 agricultural season, but also the persistent exchange depreciation. ▪ managing such pressures points to the need to implement relatively tight monetary policy to contain the inflationary pressures. ▪ we are the first to admit that the policy rate, on its own, is not sufficient to manage exchange rate pressures. the bank has had to complement the policy rate changes with upward adjustments in the statutory reserve ratio. in this regard, in early february 2024 we raised the srr to 26 % from 17 % on 5 february 2024. ▪ at the same same time it was deemed necessary that the government transfers its unutilised deposits from commercial banks to the boz. thus, on 29 january 2024, commercial banks were instructed to transfer such deposits to boz. ▪ the increased statutory reserve ratio resulted in a net withdrawal of k8. 1 billion of excess liquidity. with respect to government deposit transfers, between endjanuary 2024 and july 2024 k3. 4 billion had been transferred to boz — far much less than the projected k12 billion. liquidity risk ( cont. ) ▪ the less - than - satisfactory performance of the government deposit transfers meant that the impact was not fully achieved. with this development another way of achieving the intended objective had to be found. the bank turned to making overnight lending facility ( olf ) as the main source of commercial banks ’ liquidity as opposed to use of regular open market operations ( omo ). ▪ upon observing relative stability in the foreign exchange market conditions since june 2024, the bank started to provide commercial banks liquidity relief through the much cheaper omo facility compared with the olf