financial imbalances must have been allowed to build up during the preceding period. in other words, monetary policy makers must have seen no reason or been unable to prevent these imbalances from building up. thus, an important question is whether a monetary policy for price stability will indirectly prevent excessive debt accumulation in the economy? in other words, how likely is it that large imbalances will have time to build up before the central bank judges that its inflation target is threatened and therefore raises interest rates? can large imbalances materialise without inflationary pressure building up? a related question is whether the choice of monetary policy strategy has a bearing on the risk of financial imbalances and financial crises? for example, will a monetary policy based on a simple policy rule lead to a lower or higher risk of financial imbalances building up compared to a more discretionary policy? will an inflation targeting regime lead to a larger or smaller risk of imbalances building up compared to a monetary targeting regime? these highly relevant questions are being asked by a number of central banks in emerging markets that have recently been forced to abandon a fixed exchange rate policy that was no longer sustainable. the papers to be presented at this conference will hopefully throw some light on a number of the questions i have raised here this morning. i look forward to learning what our distinguished guests have to say on these matters.

opening remarks by francois groepe, deputy governor of the south african reserve bank, at the public workshop on proposals to establish a deposit insurance scheme for south africa south african reserve bank, pretoria 23 august 2017 introduction good afternoon, distinguished guests, ladies and gentlemen. it gives me great pleasure to welcome you to this workshop on a possible deposit insurance scheme for south africa. we are privileged to have present here today fellow central bankers, commercial bankers, financial market participants, regulators, public sector representatives, academics, members of the media fraternity, and other staff members of the south african reserve bank ( sarb ). in particular, i would like to extend a very warm welcome to the representatives from the world bank, which has been very supportive over the past two to three years in the formulation of the proposals that will be discussed today, as well as to the representatives from other central banks in the common monetary area that are present. we hope that this workshop will be the first step in expanding our fruitful cooperation in the area of managing bank failures. the sarb and national treasury are currently developing new legislation to put in place a framework that will facilitate the resolution of failing financial institutions in an orderly and transparent way, one which seeks to minimise the use of government funding to bail out such institutions. this new resolution framework is an important pillar of the sarb ’ s expanded and explicit financial stability mandate, as contained in the financial sector regulation bill. a key component of such a resolution framework is the establishment of page 1 of 6 an explicit deposit insurance scheme to ensure that the depositors who are most exposed to an asymmetry of information and thus least able to hedge themselves against financial loss in the event of a bank failure are protected against any losses and hardship that may stem from a bank failure. this framework is expected to enhance the public ’ s trust in the banking sector, which is an important aspect of financial stability. the implementation of a prefunded deposit insurance scheme will bring about closer adherence to the key attributes of effective resolution regimes and to the core principles of effective deposit insurance systems issued by the financial stability board and the international association of deposit insurers respectively. south africa has a well regulated and stable banking sector, but one that is also quite concentrated. where one tends to find relatively regular failures of small banks in some other countries, bank failures in south africa are rare – although when they do occur, they are typically more disrupting. because bank failures in south africa do not occur often and