this address as promised earlier, by making some comments on the south african banking system, and why it appears to have weathered the storm relatively well up to now. to date, south africa ’ s banking system has remained largely shielded from the direct effects of the global financial market crisis, although our banks have been somewhat affected by the general re - pricing of risk and increases in funding costs. south african banks have very limited direct exposure to the troubled toxic securitised debt market in the us, partly owing to prudential restrictions on the type of assets and on the extent to which domestic banks are allowed to invest offshore. in addition, securitisation activities of our banks have been moderate and prudent. as a result, the high leveraging observed in some other jurisdictions has not been evident in the south african banking sector and our banks have continued to follow a fairly traditional banking model. even more significantly, south african banks are predominantly funded by domestic deposits, and not through internationally held structured products. as at the end of december 2008, the total foreigncurrency denominated deposits of banks amounted to r78, 3 billion, and other foreigncurrency denominated funding to r86, 7 billion, together comprising 6, 7 per cent of banks ’ combined total funding liabilities of r2, 4 trillion. even of this relatively small amount, only a portion is provided by non - residents. south african banks are well capitalised, with an overall capital adequacy ratio of 13, 0 per cent of risk - weighted assets under the basel ii measurement, as at the end of december 2008, which is 3, 5 percentage points above the minimum requirement of 9, 5 per cent. even on the basis of capital to total un - weighted assets, they are not highly leveraged. also noteworthy is that tier 1 capital adequacy stood at 10, 2 per cent. this high level of capitalisation makes the banking sector more resilient to economic shocks. although some deterioration in asset quality has been observed over recent months ( for example, impaired advances to gross loans and advances increased to 3, 8 per cent by december 2008 ), this was more attributable to the tightening of domestic monetary policy and slowing growth than to the global financial crisis. these trends are not out of line with what would be expected in the current stage of the domestic economic cycle, and impaired loans are adequately provided for. the foreclosure procedures in

stanley fischer : capital market reforms in israel address by professor stanley fischer, governor of the bank of israel, to the knesset finance committee, jerusalem, 5 july 2005. * * * mr chair of the finance committee mk yakov litzman, members of knesset, ladies and gentlemen : this is my second appearance here before you, and i am pleased that the subject concerning which you invited me is also one of the most important to have reached the knesset in the recent past – – the reform of the capital market in line with the proposals of the bachar committee. let me clearly state at the outset that i support the reform proposed by the bachar committee. that is what i said a month and a half ago here when i first addressed you as governor, and again last week to the participants in the caesarea conference. when i say that i support the bachar committee reforms i mean the following : 1. i agree that the purposes of the reform have great impact on the financial system's ability to support growth in israel. these purposes are : a. to reduce the concentration in the financial system and to increase competition in the capital market. b. to reduce the possibility of conflict of interest in the financial system. c. to create significant alternatives to the banking system as sources of finance. 2. i favor separating the provident funds and the mutual funds from the banks as this is a way of achieving all three of the above objectives. 3. i favor allowing the banks, after the above separation, to give objective advice about, and to distribute life insurance, pension schemes, provident funds and mutual funds, provided we find a way to prevent the banks from abusing the power and dominance they hold owing to their extensive distribution network to give them an unfair advantage. in this context the proposed restrictions on bank fees are intended to ensure that this will not happen. 4. i am in favor of banks known as emerging banks selling their mutual funds and provident funds as is proposed for the big banks and operating within the same framework proposed for the big banks. otherwise the present potential for conflicts of interest will remain. we have recently heard from the emerging banks that they need the various funds to preserve their financial robustness. i believe that separation will not adversely affect their robustness ; on the contrary, after the implementation of the reform of the capital market, the developments in the financial system, and in particular in the banking system, will lead to the creation of incentives to the emerging banks to