piloting of the system is scheduled to commence on 27 april 2004. it is therefore cardinal that the entire industry moves in unison on this project. as indicated to commercial banks at the last meeting, the training of both bank of zambia and commercial banks staff and the execution of the pilot project have been arranged close to each other to enable the quick and effective transfer of acquired skills to staff ’ s “ desks ” or operational areas. therefore, the need for all banks to move at the same pace cannot be over emphasised. counterfeits • we would like to alert you all that there are people trying to encash counterfeit notes and as banks you are the most vulnerable. it is therefore incumbent upon all of your members of staff to be vigilant when handling incoming cash. the incidence of the counterfeits is suspected to affect other locations beyond lusaka as such even your outlying areas must be alerted. you should urgently report such cases to the zambia police service. bank of zambia and government participation in foreign exchange market • as discussed during the meeting in ndola and consistent with the code of conduct for the broad based interbank system, we would like to reiterate the fact that bank of zambia is a participant in the market like all other players. as such the bank ’ s participation should not be seen as extraordinary but as part of the process. equally, government participation should be treated in a similar manner. • in addition, a number of issues were raised in the workshop regarding the operations of the foreign exchange market and a report has been circulated to that effect. in this regard, the bank of zambia will soon write to the bankers association of zambia ( baz ) outlining those issues that require action by all concerned parties. use of edp funds • it has come to our attention that some intermediaries of the edp funds are not utilizing the funds according to the agreed rules. in some instances, the intermediaries are not on - lending the funds to their clients. such practices if allowed to continue will defeat the purpose of the efforts aimed at creating a sustainable source of wholesale medium - to long - term funds in our market. we wish to urge all of you to adhere to the established rules, failure to which those institutions engaged in unacceptable practices may not be able to secure such funding in the future thereby denying their clients critical project funding. zibac meeting • a second meeting for the zambia international business advisory council ( zibac ), was held

##mediating between those with surplus resources ( depositors ) and those in need of resources ( investors ). in view of the foregoing, effective and efficient supervision is crucial to limit the risk of loss to depositors, henceforth maintaining public confidence in the financial system. in response to the liberalised environment, there has been a proliferation of linkages between institutions operating in various segments of the financial sector and a growing number of financial mergers and acquisitions, thus creating, in the process, huge financial conglomerates. for instance, banks and insurance companies are searching for growth through the diversification of their activities in such a way that they can no longer be considered as homogeneous institutions falling within the scope of one economic sector and one supervisory system! these conglomerates aim to exploit the synergies that exist among banking, insurance and investment. this market evolution towards huge financial conglomerates, with integrated product development is slowly blurring the traditional boundaries between banks and non - bank financial institutions, on the one hand, and the supervision of these institutions, on the other. in spite of these trends in the international financial markets, regrettably, supervisory systems, in our sub - region, are mainly structured along the traditional boundaries demarcating banks, insurance companies, investment and micro - finance institutions. these integration changes represent major challenges to the supervisors of the different sectors, especially as the financial institutions become more complex in their structures and operations. notwithstanding the foregoing, the sluggish growth of our economies in the sub - region has also created a difficult operating environment for financial institutions, especially banks. as a result, this has contributed to the mushrooming of non - bank financial institutions, such as, micro - finance. it is a fact that the financial sector in our sub - region is dominated by commercial banks, which have continued to service only a small section of the population. the majority of the people are denied access, largely, due to numerous reasons, including perceived risks, high costs involved in dealing in small transactions and the inability to provide marketable collateral for loans. it is against this background that financial sector supervision should also be directed at financial institutions that pose the greatest risks, such as, non - bank financial institutions. in this regard, the adoption of the risk - based approach allows the supervisor to devote more supervisory effort to those areas that have a high - risk profile. this therefore, entails that supervisory authorities should shift their focus from the traditional capital, assets, management, earnings, liquidity