time ever in about 20 years, the country ’ s inflation rate had grown above 30 %, a situation which appeared to be growing out of control. we are grateful to god that as this year draws to a close, the inflation rate is dropping from 30. 4 % in the month of october to 29 % in november and will certainly continue to drop. the uganda shilling has also appreciated to the dollar from a low adverse rate of almost 2, 900 / = in the month of october to a higher value of 2, 500 / = to date. we have registered several milestones towards achievement of set goals of customer satisfaction by aiming at zero tolerance for inefficiencies in the financial, monetary and payment systems which in turn have contributed tremendously towards regional harmonization. bis central bankers ’ speeches some of these milestones include, close and effective supervision of financial institutions to ensure financial soundness of the economy, launching of inflation targeting, upgrade of the rtgs from a uganda shilling based system to one that supports east african currencies, creation of a platform for cross - border payments, launching of internet banking, and facelift of the bou website. since the implementation of bank of uganda banking system ( bbs ) in july 2010, the bank has registered the following successes : considerable improvement in service delivery to our customers real time account balances and statements provision of daily government position holding 2 daily clearing sessions and improved financial reporting amidst all the above milestones, there have been significant challenges. “ to be tested is good. the challenged life may be the best therapist. ” ( gail sheehy ). during this year, we ( bou ) have featured in the media but we have seen the almighty god vindicate us from various accusations. we continue to thank god for the registered victory, the trust that he will take us through any other challenges and that through all this we are coming out more resilient and a better bou! this year, as part of our corporate social responsibility, we have committed to facilitate the running of a mobile dental clinic for hiv positive children that will be held at reach out mbuya clinic in kasaala on 17th december 2011. this clinic will be conducted by dr. brian rushaju who is here today with his wife and i thank dr. rushaju for partnering with us in this cause. i want to thank each one of you very candidly for your individual and collective contributions towards making this year a great success

these standards should be complemented with macro prudential regulation. for example, regulatory standards can be proportional to the institution ’ s potential contribution to estimated systemic risk and may include also countercyclical buffers such as those incorporated in the basel iii accord. additionally, public information about markets and institutions should be enhanced. on the reactive front, authorities face the dual challenge of trying to opportunely detect possible systemic problems and, if they arise, attempt to neutralize them, without suppressing market discipline. examples of macro prudential policy actions are lower loanto - value ratios, securitization restrictions, and more stringent capital and liquidity requirements. it is convenient that these measures deal with the problem of systemic risk and not with other objectives, such as targeting certain values of a currency exchange rate, under the guise of a macro prudential approach. a major challenge in accomplishing this task is the timely identification of systemic crisis signs. one should remember that recurrence of financial crises has been the norm and many of them have come as a surprise to supervisors, as it dramatically was the case with the recent financial debacle. hence, it is important to avoid excessive expectations about what macro prudential policy can achieve, since this comfort could lead to distortive measures and moral hazard. the final role refers to crisis management. this includes supplying liquidity on good collateral at penalty rates, according to the prescription of bagehot, and the design and implementation of expedient resolution mechanisms, including “ living wills ”, for insolvent financial institutions. 6 concluding remarks preventing and counteracting systemic risk poses important challenges for policy making. a more specific notion of systemic risk is much needed and, as put by lars hansen, leaving the concept vague may become a justification for regulatory discretion. also, understanding see bagehot, w. ( 1873 ). lombard street : a description of the money market. e. johnstone ; hartley withers, eds. london : henry s. king and co. bis central bankers ’ speeches the sources of systemic risk is essential. certainly, it would be quite inconvenient to combat a phenomenon that is not a root cause of systemic risk, generating inefficiencies such as protectionism. finally, policy measures must avoid producing inadequate incentives and be both preventive and reactive, without removing the market discipline that is necessary for prudent risk taking. bis central bankers ’ speeches