sector the gradual removal of exchange controls was accompanied by some major restructuring of the financial sector in south africa. to encourage competition in the market, more foreign banks were allowed to establish themselves in the country. more than 20 foreign banks opened up branches or subsidiaries in south africa, and more than 60 foreign banks now do business in the country through representative offices. together with about 35 domestic banking institutions, the south african banking industry is now providing, on a competitive basis, excellent and modern financial services to the country. the industry is healthy, well - managed and subject to financial regulation and supervision based on the principles of the basle committee guidelines and core principles. while the gradual phasing - out of exchange control continued, the financial markets were also restructured, liberalised and made more flexible to accommodate almost explosive increases in volumes. in the capital market, three separate specialised institutions were created to provide, respectively, for equity trading on the johannesburg stock exchange ( jse ), bond trading on the bond exchange of south africa, and trading in derivatives on the south african futures exchange. two years ago, the jse introduced major reforms to provide for corporate ownership, foreign ownership ( of stock brokers ), dual capacity trading, negotiated commissions and electronic screen trading. the jse is continuing to improve its facilities by providing for the immobilisation and dematerialisation of stock, and for improved clearing and settlement arrangements. with a listing of about 700 different securities, a total market capitalisation of about us $ 275 billion and a turnover of about us $ 45 billion last year, the jse is now classified as one of the major stock exchanges of the world. the most spectacular increase in the total volume of transactions over the past few years took place in the bond exchange of south africa. total turnover in this market increased from the equivalent of us $ 553 billion in 1995, to us $ 927 billion in 1997, that is an increase of 67. 6 per cent over just two years. the relaxation of the exchange controls made an important contribution to the development of the bond exchange. total gross transactions by non - residents in this market last year exceeded the equivalent of us $ 257 billion, or almost 30 per cent of total turnover. interest is also growing in the south african futures exchange. the total number of contracts traded in this market increased from 3½ billion in 1995 to more than 5 billion in 1997. a further important development that flowed from the globalisation process is the emergence of a euro

all know what led to the 2007 / 2008 crisis. those opaque derivative products led to an asset bubble and the sub - prime mortgage sector was simply the catalyst that popped that asset bubble. essentially, it was a mispricing of those risk assets. the current events unfolding in the international economic environment are both challenging as well as unique. though substantial progress was made to limit the effects of the financial crisis, the vulnerability still persists in the shape and size not imagined earlier. few would have thought that the effects of the sub - prime crisis will question the survival of the euro currency and would threaten the entire european region to fall into a severe recession. meanwhile, in our domestic economy though, we have largely been successful in mitigating the effects of exogenous shocks and contagion risks of the international crisis. but we still face challenges of our own, and ensuring conservative and prudent policies, should enable us to remain resilient from exogenous shocks. bis central bankers ’ speeches among many other factors, the global financial crisis and domestic turbulence can also be attributed to failures in corporate ethics and underlying weaknesses in how corporate governance is practiced. internationally, the prevailing corporate governance practices failed to safeguard against excessive risks taken by leading financial institutions. the market players exhibited herd behavior and deviated from the ethical norms by engaging in speculative activities for self - gain. hence, it can be argued that for efficient and wellfunctioning markets, a responsible and ethical behavior of the participants is a pre - requisite apart from an enabling environment, proper infrastructure, skills and knowledge. similarly, domestically it behooves us to upgrade our corporate governance practices at all institutions to strengthen our pace of economic recovery and make the environment more challenging and productive for corporates and private institutions. one key lesson policy makers and regulators learned from the recent sub - prime crisis is that among many other factors, weak corporate governance practices in leading financial institutions played a crucial role in creating the asset price bubble and misallocation of financial resources. as a result, policy makers in the post - crisis period are placing more emphasis on improving market transparency and corporate disclosure. similarly, regulators have also placed heavy emphasis on imposing stricter regulatory regimes and hands - on approach towards ensuring sound corporate governance practices. these measures have encouraged the boards and management of financial institutions to improve their governance practices and eliminate knowledge gaps. the regulators also require the boards to develop their capacity to assess the nature of risks keeping in view the size and complexity