h r khan : understanding psychology for responsible financial behaviour inaugural address by shri h r khan, deputy governor of the reserve bank of india, at the interdisciplinary seminar on psychonomics – understanding the psychology of financial behavior organised by maharshi dayanand college of arts, science & commerce, mumbai, 6 february 2012. * * * the speaker acknowledges the contribution of shri. anand shankar, shri sittikantha pattanaik and shri. surajit bose in preparation of the address. 1. i thank the organizers of the golden jubilee celebrations of the maharshi dayanand college of arts, science & commerce, mumbai for inviting me to deliver the inaugural address at this important seminar. the interdisciplinary seminar on psychonomics : understanding the psychology behind financial behaviour is indeed a very topical subject and especially when the world is realizing the significance of the import of human psychology in the economic behaviour of the markets. it is not often that one gets an opportunity to share thoughts with an enthusiastic group of students and faculty with diverse educational backgrounds and put forth views on psychology in order to explain economics. today, particularly in the context of recent financial crisis, it is well - accepted that psychology does influence many economic decisions which defy pure economic theories. 2. as we all know, during the classical period, economics had an established link with psychology. for example, adam smith, who is considered as father of economics, in his work on the theory of moral sentiments, had described psychological principles of individual behaviour. jeremy bentham, founding father of modern utilitarism ideas, wrote extensively on the psychological aspects of utility. overtime, economists, however, began to distance themselves from psychology as they sought to reshape the discipline as a natural science. by mid - 20th century, psychology lost its linkages with economics. in the 1950s, herbert simons challenged some of the traits of standard economic model of human behaviour, i. e., unbounded rationality, unbounded will - power and unbounded selfishness. he questioned the idea that people have unlimited information processing capabilities. rather he propounded the idea of “ bounded rationality ” to suggest a more realistic conception of problem solving ability of human beings. it was also suggested that human beings struggle to analyse problems objectively as they view them through a “ frame ” of personal experience often shaped by social and cultural bias. in mid 1960s, ward edwards, amos tversky and daniel kahneman began to compare their cognitive

xolile p guma : south africa ’ s financial stability review – key issues in march 2011 introductory remarks by dr xolile p guma, senior deputy governor of the south african reserve bank, at the launch of the march 2011 financial stability review, pretoria, 20 april 2011. * * * members of the press, other guests and colleagues on behalf of the south african reserve bank, i would like to welcome you to the release of the march 2011 edition of the financial stability review ; the fifteenth publication in this series. the bank knows that it is not the sole custodian of financial - system stability. financial stability is a responsibility that it shares with other role - players and it is well placed to take a leading role. to pursue the maintenance of financially stable conditions and contain systemic risk, the bank continually assesses the stability and efficiency of the key components of the financial system and formulates and reviews policies for intervention and crisis resolution. the assessment largely takes the form of the financial stability review. i turn now to the financial stability review and highlight some of the key issues that the march 2011 edition addresses. first, the review indicates that during the second half of 2010 global macrofinancial conditions improved broadly, although pockets of vulnerability and risk remain and significant policy challenges still need to be addressed. global economic activity moderated somewhat as the brisk recovery phase following the global financial crisis turned into a slower and, hopefully, more sustainable recovery. the multi - speed nature of the recovery continues with subdued economic growth and high unemployment in advanced economies, and buoyant economic activity and rising inflationary pressures in many emerging market economies. the financial risks in advanced economies that might impact on the stability of the south african financial system, and which are discussed comprehensively in the financial stability review, are vulnerabilities in the euro area ; banking - sector vulnerabilities ; negative sentiment and declining prices in real - estate markets in a number of advanced economies ; and a broadening of the concept of global imbalances as trade, fiscal and investment imbalances have increased. emerging market economies as a group remained important drivers of global economic growth in the second half of 2010 with countries in developing asia recording the most rapid growth among all of these countries. emerging market economies are, however, also exposed to lingering downside risks in the form of rising inflationary pressures, the possibility of sudden reversals of capital inflows and sharp increases in the level and volatility of commodity prices.