capture also contributed. shortcomings were highlighted in evaluations such as the financial sector assessment programmes ( fsap ). it is not surprising then, that regulators and standardsetting bodies decided on the need for a major overhaul of the global banking regulatory framework, hence basel iii. prior to the events of 2008, regulators were already faced with evidence highlighting the shortcomings of basel ii, including over - reliance on financial risk models to determine capital levels and the role of credit rating agencies ( i see the conference programme includes the important topic of model risk ). in early 2008, basel ii had only recently been adopted in some of the world ’ s dominant economies, with preparations underway for a comparable capital regime in the insurance industry in the form of solvency ii. basel ii. 5, which focused on tougher controls on trade credit and securitisation derivatives, was introduced too late to bis central bankers ’ speeches have any mitigating effect on banking capital. therefore, some argue that its publication essentially became a matter of course that had to be dispensed with before the framework in its entirety received renewed scrutiny. basel iii, the basel committee on banking supervision ’ s ( bcbs ) 1 response to the global financial crisis, sought to improve the banking sector ’ s shock absorbing ability, thus reducing the risk of spill over from the financial sector to the real economy. as time passed, the complexity of the financial reform agenda increased, particularly in terms of institutions covered, instruments subject to regulation, and cross - border implications. as i indicated earlier, now that we have reached the point of implementation and monitoring, concerns are being raised around issues such as inconsistency in the domestic implementation of the new regulatory standards and their applicability to all countries, and possible “ unintended consequences ”, which include the economic impact of the reforms which need to be balanced against the need for financial stability. the g20, which put financial regulation high on its agenda since the first leaders ’ summit in 2008, has recognised the importance of “ finishing the job ”, and the focus for 2014 is to deliver on a range of outstanding reform issues, which i will elaborate on later. 3. regulatory alignment and supervisory change in south africa south africa, as a member of the g20, seeks to adhere to international standards of financial supervision and regulation as far as possible, taking into account domestic circumstances. basel ii compliance by south african registered banks commenced in january 2008. as alluded to

ultimately lead to higher payments. just as with credit cards, however, disclosing a consumer's repayment obligation and the cost of the credit is more complex when there are unknowns – such as the future rate if it may vary based on an index, the amount of the consumer's monthly payment, and the possibility of negative amortization. when the board reviews mortgage disclosures, it will consider these developments and conduct extensive consumer testing to determine how the features and risks of today's mortgage products can be communicated effectively. the board has already taken some initial steps in its review of mortgage disclosures. last summer, the board held a series of four public hearings on home - equity lending, where we gathered views on the impact of federal and state predatory lending laws and on the adequacy of mortgage disclosures, particularly those concerning nontraditional mortgage products. following those hearings, the board revised the consumer handbook that creditors are required to provide with applications for all arms. the revised handbook gives consumers a better explanation of the features and risks of nontraditional arms, especially " payment shock " and the risk of increasing loan balances, also known as " negative amortization. " the recent problems in the subprime mortgage market have prompted the board to hold a fifth hearing, which i will chair tomorrow, here in washington, d. c. the purpose of the hearing is to gather information to evaluate how the federal reserve might use its rulemaking authority to curb abusive lending practices in the subprime mortgage market in a way that also preserves incentives for responsible lenders. specifically, hearing participants will discuss concerns about prepayment penalties, escrows for taxes and insurance, " stated - income " loans, and lenders'standards for determining that consumers can afford to make the scheduled payments. some of these concerns may call for more effective disclosures. however, we will also seriously consider whether there are mortgage lending practices that should be prohibited under hoepa. we must be careful, however, not to curtail responsible subprime lending or beneficial financing options for consumers. a robust and responsible subprime mortgage market benefits consumers by allowing borrowers with non - prime or limited credit histories to become homeowners, access the equity in their homes, or have the flexibility to refinance their loans as needed. under hoepa, lenders are subject not only to regulatory enforcement actions but also to private lawsuits to redress violations. thus, any