efficiency in the allocation of resource in the economy. allow me to briefly highlight some of the key policy initiatives that the bank of zambia has recently introduced : 1 ) reduction of statutory reserve ratios : in the fourth quarter of 2011, the bank of zambia reduced both the statutory and core liquid asset ratios by 3 percentage points to 5. 0 % and 6. 0 % respectively. the policy measure was intended to loosen liquidity for commercial banks to enable them increase their lending to productive bis central bankers ’ speeches sectors of the economy. the measure was also aimed at influencing the pricing of the loans especially in light of high lending rates prevailing in the economy ; 2 ) increase in capital : a robust banking industry is indispensable for supporting investments in the economy. a lower capital base entails limited participation in the financing of investments in addition to increased vulnerability of the banking industry. from the last quarter of 2011, the banking sector saw significant regulatory reform as the capital thresholds for banks were increased. local owned banks are now required to have a capital base of k104 billion whilst foreign owned banks are required to have a minimum capital base of k520 billion. the revised thresholds are aimed at ensuring that we have the best possible environment in which banks can carry out these key functions. as i stated earlier, banks are specialised institutions and they are fundamental to the working of the economy and linked to all parts of the financial system. but the consequence is that if banks fail, the external effects can have an adverse impact on the financial system and the economy. that is why banks are required to maintain a certain level of minimum capital. in this regard, the central bank provides oversight through prudential supervision. therefore, the measures to revise the capital adequacy framework for zambia enhances the resilience of the sector to both internal and external shocks by improving the quality and quantity of the capital available for commercial banks ; 3 ) introduction of the policy rate : the policy rate was introduced in order to provide a benchmark rate for the banking industry on which pricing for lending products can be based. it also promotes transparency in the price discovery mechanisms in the banking sector while minimizing information asymmetry particularly that associated with the credit markets ; 4 ) statutory instrument no. 33 on bank of zambia currency regulations : this measure was introduced with a view to reinforcing the use of the zambian kwacha as the legal tender in the republic of zambia. the increased use of foreign currency cash

tukiya kankasa - mabula : bank of zambia ’ s key policy initiatives speech by dr tukiya kankasa - mabula, deputy governor ( administration ) of the bank of zambia, at the bankers association of zambia bankers annual ball, lusaka, 14 september 2012. * * * • the chairperson, bankers association of zambia, mr friday ndhlovu, • managing directors and chief executive officers of member banks, • managing directors & associations, • management and staff of member banks, • distinguished invited guests, • members of the press, • ladies and gentlemen. and chief executive officers of various institutions good evening, before i deliver my speech this evening, i would like us to observe a minute of silence in honour of the late mrs margaret ndhlovu, wife of mr friday ndhlovu who passed on late last month. as the saying goes, behind every successful man, there is a woman. our prayers and thoughts go out to the ndhlovu family as they come to terms with the loss. distinguished invited guests, it is my honour and privilege to officiate at this year ’ s bankers annual ball for the bankers association of zambia. it is also my pleasure to warmly welcome mr friday ndhlovu, the managing director of investrust bank plc and the in - coming chairperson of the association who is taking over from ms charity lumpa who will be assuming a new role within the ecobank group in lome, togo. join me in wishing mr ndhlovu well in his new role and i have every confidence that he will perform to distinction. i wish to take this opportunity to thank ms lumpa for her able stewardship of the association and wish her well in her new appointment. i have every confidence that she will excel. ladies and gentlemen, the banking industry plays an important role in any economy, particularly the role of intermediating funds between savers and borrowers. it also plays an equally important role in providing payment system platform where economic agents can settle their transactions. you will also note that the performance of these functions also attracts numerous risks which have potential to compromise the stability and the efficient operations of the banking industry. the regulatory environment therefore requires adjusting appropriately in response to developments in the financial system. chairperson, you will note that the bank of zambia has, in the most recent past, introduced a number of measures aimed at enhancing stability of the banking industry in zambia as well as to enhance the transparency and