. 1 1 / 4 bis - central bankers'speeches although the rise in interest rates may be welcomed by the banks, it may also introduce potential risks. with the current uncertain inflation and geopolitical outlook, further strong and rapid interest rates hikes cannot be ruled out. just look at the rapid pace at which the federal reserve has been increasing rates in the us. in such a scenario, banks'assumptions regarding the interest rate sensitivity of deposit funding and the prepayment behaviour of mortgage customers will be tested. furthermore, we are observing a deterioration of funding conditions with increasing credit spreads on market funding and tltro funding that needs to be repaid. this might have two effects. first, it might directly put downward pressure on banks'net interest income. second, it might indirectly increase the competition for deposits. this illustrates that, in the times ahead, a deep understanding of the dynamics in interest rate management, and of the underlying assumptions, will be crucial for banks, but also for us as supervisors. next, a word about credit losses. since the invasion of ukraine, financial institutions have had to absorb credit losses on their exposures to russian, ukrainian and energy - intensive businesses. looking ahead, uncertainty dominates the economic outlook : the so - called secondorder effects of macro - economic developments on banks are difficult to anticipate or to quantify. the inflationary shock will have large and diverse income effects. on top of that, the tightening of monetary policy will increase real interest rates, and this will almost inevitably lead to lower real economic growth, and thus negatively affect banks'customers, and their ability to pay their loans. looking at the european housing market in particular, we see that it has been cooling off for several months. higher mortgage rates and a loss of household purchasing power can lead to lower lending growth and an increase in household defaults. and as a result, credit losses for banks on mortgage loans might increase. challenging times lie ahead for the corporate sector, too, especially for those corporates that are not able to adjust to the energy shock, and those that operate in cyclical sectors or in sectors that are sensitive to funding risks. a particular example of these funding risks are the risks that have accumulated as a consequence of the search for yield during the prolonged period of low interest rates. the leveraged finance portfolios of banks have expanded in recent years and their quality could quickly deteriorate when corporate earnings decrease. what makes the current economic situation extra challenging is

be given a charter which includes a strong commitment to price stability, and the freedom and sufficient scope to pursue it. this means that while central banks may not have goal independence, they should have operational or instrument independence to effectively pursue their primary objectives. in a democratic society, transparency and accountability are essential if central bank independence is to remain “ acceptable to the public ”. providing for a sufficient degree of transparency can help not only to increase the understanding of monetary policy which ultimately enhances central bank credibility. your honour, this conference follows a similar one held in botswana hosted by the botswana central bank from 5 to 6 february, 2007 and supported by the bis governance forum and the imf. it also comes shortly after our very successful conference held at this same venue in november last year on the theme, “ central bank independence, does it hurt the treasury? ” all these activities are part of the building blocks to a bigger project we have been undertaking in the sadc region aimed at developing a model central bank act. for us in zambia, efforts at perfecting the governance as well as the operational efficiency of the financial sector are being done through the financial sector development plan ( fsdp ). under the plan we have already developed corporate governance guidelines for the financial sector as a whole. many of these have a lot of relevance to the central bank as well. through the fsdp, even issues such as who should chair the board of the central bank are being discussed. lastly, let me say that we expect to learn from what other central banks have done, and what challenges they have faced in their quest for enhanced central bank governance. however, it should be noted that each country should establish a legal framework for its central bank governance, which best fits that country ’ s own history and institutional evolution. this should also take into account international best practice. your honour, apart from zambian delegates, this international seminar has drawn participation from several other countries including : angola, ghana, kenya, lesotho, madagascar, malawi, mauritius and mozambique. other participants are from namibia, nigeria, sweden, tanzania, swaziland and uganda. with this wide participation, i have no doubt that the seminar will be thought - provoking and highly participatory, given also the high calibre of resource persons from institutions such as the international monetary fund and the bank of international settlements. i therefore wish all of you good deliberations and a memorable stay in livingstone and zambia in general. it is now my