remarks by lesetja kganyago, governor of the south african reserve bank, at the annual dinner in honour of the ambassadors and high commissioners to the republic of south africa south african reserve bank, pretoria 7 june 2017 introduction dean of the diplomatic corps, ambassadors, high commissioners, counsellors and diplomats – a very good evening to you all. thank you for accepting our invitation to this event, which has become a permanent feature on our calendar. south africa has its fair share of challenges. our country finds itself at an intensely contested but creative moment in its history. south africans are energetically debating the problems we face today and the policies we should be implementing to fix these problems. notwithstanding these challenges, south africa has a number of positive things going for it, not least of which are its institutions, which remain resilient. however, it is not my intention to bore you with the developments in south africa tonight. i would prefer to use the limited time i have on this podium to touch on global economic developments and say a bit more about some of the initiatives that the south african reserve bank ( sarb ) has been involved in on the continent and in other global forums. i will be brief, so that we can enjoy the excellent food and wine on offer tonight. a global economy experiencing a cyclical recovery page 1 of 7 over the past few years, the world has had to become accustomed to disappointing global growth outcomes. therefore, when the international monetary fund ( imf ) identified 2016 as the turning point in the global growth cycle and upgraded the outlook for the global economy for 2017, it came as a welcome surprise. broad - based gains were pencilled in across both the developed world and emerging markets. it seemed that the many years of accommodative and often unorthodox monetary policy, coupled with the more recent easier fiscal policy in the advanced economies, had helped to propel the global economy into a cyclical upswing. but despite the promising short - term outlook, a number of challenges and risks persist, and i would like to highlight a few of these. the shift towards more inward - looking policies threatens to derail global trade, with negative consequences for growth. and the lack of progress in the implementation of some of the financial regulatory reforms agreed on since the most recent global financial crisis, such as finalising the capital framework under basel iii, is also something we need to address as it threatens to create an uneven global playing field, putting some countries at

institutional ”. 1 a macroprudential approach firstly, has a time dimension which deals with how risk evolves over time, with procyclicality as the primary source of risk. secondly, it has a cross - sectional dimension dealing with how risk is allocated within the financial system at a given point in time, with common exposures and inter - linkages between financial firms as the primary sources of risk. in simple terms, a macroprudential policy approach is therefore one where fiscal, monetary and regulatory policy are all aimed at either changing or countering the collective behaviour borio, c. 2010. implementing a macroprudential framework : blending boldness and realism, bank for international settlements, july. of financial institutions in order to reduce the systemic risk emanating from such behaviour. this is a very complex task which poses big challenges for policymakers and regulators. i turn now to the financial stability review and the key issues it addresses. during the first half of 2010 downside risks to the steady economic recovery and improving macrofinancial conditions rose sharply in advanced economies. concerns about the fiscal positions of a number of euro area countries soon turned into a sovereign debt crisis. reprieve only set in with the announcement of a comprehensive rescue package by the joint european authorities and the international monetary fund. in emerging market economies gdp growth has been robust and incentives for capital inflows are expected to remain strong. as a result asset - price bubbles, financial market instability and uncertainty and fragility of financial systems in general, present risks to the outlook in emerging economies. generally, conditions in the global financial system are still influenced by above - normal levels of uncertainty, highlighting the fact that the process of repairing impaired financial systems is far from complete. in south africa, despite positive signs of economic recovery, employment continued to decline, placing a significant damper on the domestic financial system. nevertheless, the banking and insurance sectors maintained high - quality capital buffers well above the minimum prudential requirements, and remained profitable. growth in bank credit granted has begun to increase, the growth rate in impaired advances is decelerating and lending standards of banks are showing signs of loosening. although indications are that initial expectations of a vigorous recovery in real economic activity were too optimistic, business confidence rebounded in the third quarter of 2010. despite the negative sentiment brought about by rising unemployment, the level of consumer confidence remained almost unchanged in the second and third quarters of 2010, following a strong recovery