as the global economy reevaluates and repositions itself to achieve full recovery, it is but fitting, especially as our nation marks its 50th independence anniversary, that the bank spearheads efforts to ensure that the financial system is robust enough to withstand any future shocks. in doing so, let us recall the developments on the global, regional and sub regional levels before examining the initiatives to reposition the bank. global financial developments your excellency, distinguished guests, as mentioned in my speech last year, the global economy is recovering, though at a slower and unbalanced pace. according to the imf ’ s world economic outlook, global growth was projected at 4. 8 percent in 2010 with asia and latin america experiencing strong growth. africa was also expected to experience robust growth, but growth in europe was sluggish whilst in the united states, it remained subdued. bis central bankers ’ speeches this uneven scenario in global growth has created several downside risks, including risks to the financial sector. there is no guarantee that the problems in the financial sector have been adequately addressed, but there have been concerted efforts to ensure that they do not recur. the introduction of new rules, in particular basel iii is expected to help in this direction, as basel iii will address issues including strengthening risk coverage of capital for banks, the buildup of capital buffers and the introduction of global minimum liquidity standards. however, countries are now realizing that in addition to these new rules there is the need for better supervision and the creation of crisis resolution mechanisms. your excellency, distinguished guests, despite the down side risks to the global economy, there is room for optimism which stems from the progress being made to repair and reform the financial sector, including developing macro prudential approaches to limit systemic risks. monetary policy in the developed economies should remain accommodative in order to serve as the first line of defense in the event of a future shock. exchange rate policies are expected to be designed to support rebalancing of global demand, while structural reforms to enhance access to finance by small and medium scale enterprises ( smes ), should help boost growth and reduce unemployment. finally, better policy coordination among all stakeholders should help alleviate liquidity constraints and rebuild confidence. regional financial trends your excellency, distinguished guests, africa has been reasonably unaffected by the crisis due to the low level of exposure of its economies to international trade and financial flows. the continent experienced encouraging growth in 2010 not only on

depreciation since 2011. the deficit, in turn, heightens our vulnerability to shocks, as we saw in may 2013 and again this month, when we published the information that the current account deficit for the second quarter was 6. 2 % of gdp. south africa needs rebalancing, and this will be aided both by the moderation of policy stimulus, which often generates import - intensive demand, and the weaker currency, which makes foreign goods and services less attractive relative to locally - produced ones. financial stability finally, we should consider the implications of monetary policy developments for financial stability. the decision to put african bank under curatorship was not a signal of concern with a weak banking system. it was a specific intervention targeted at idiosyncratic risks emanating from a small bank ( which accounts for about 1. 2 % of total banking sector assets ) emanating from its unique, undiversified and as such unsustainable business model. critically, the terms of the curatorship as announced by the governor on 10 august are designed to ensure that the bank remains open for business, preventing an abrupt halt to credit extension to the important segment of the market ( low income earners ) which african bank serves. such credit extension, however, is now done on much sustainable terms, given the need to improve asset quality in the banking book of the “ good bank ”. given the isolated nature of the intervention, and the uniqueness of african bank ’ s previous business model, the concern that higher rates will impose an unbearable burden on borrowers, with dire consequences for lenders in general is overstated. most clients of african bank had fixed rate loans. for the rest of south african borrowers, interest rates are rising slowly from very low levels, giving borrowers and lenders plenty of warning and space, as well as incentives, to improve their balance sheets. 5. conclusion in 2003, the nobel - prize winning economist robert lucas published an article in the american economic review entitled “ macroeconomic priorities ”. it was elegant, compelling, and a terrible prophecy. he argued that further attempts to smooth out the business cycle weren ’ t much use, because fluctuations in economic activity just didn ’ t cost much. instead, the priority should be growth, because over the longer run that meant vastly more wealth. naturally, the great recession devastated this argument. lucas was not entirely right : there was still an awful lot to be learnt about depression - fighting and high costs to getting