economy. therefore, there is an intimate relationship between capital on one hand, and economic development on the other. in order to promote economic growth, financial institutions have the primary responsibility of ensuring that capital is allocated to the most productive projects which assure the highest return possible. thus, the main mechanisms of growth stem from the improvements in the functioning of financial markets, and the effect this has on transforming risks and maturity of assets and liabilities of which capital markets development plays an important role. ladies and gentlemen, even as the private sector takes centre stage in this process, the government also has an important role to play. the absence of government means that financial markets operate without proper regulatory structures. without a formally regulated financial system, informal financial markets tend to fill in the gap but at sub - optimal levels with high transactions and other related costs. as a result, there is less efficient allocation of capital which in turn translates into low levels of economic growth as investment funding is limited by the cost of transactions. therefore, efficient capital allocation relies chiefly on a properly functioning financial system, which enables firms and households to share risks and also facilitates the transformation of more liquid liabilities into illiquid but productive investments. instruments and the structure of capital markets distinguished ladies and gentlemen : looking at the objective of every economy, it is clear that all countries develop the depth and breadth of their financial markets to meet the needs of the real economy. this includes making a wide range of choices available to investors and issuers of securities in fixed - income and equity markets. bond issuers, for example, would ideally be able to issue a variety of maturities with both variable and fixed rates. money markets : the market for securities of less than one year includes government and central bank bills, repurchase agreements of government paper ( repos ), commercial bank certificates of deposit, corporate commercial paper and trade finance instruments such as bankers ’ acceptances. these markets, in their inter - bank or over - the - counter ( otc ) form, have been in existence for a long time in many countries. a newer phenomenon, however, has been for these instruments to be listed on organized stock exchanges and for central banks to increasingly conduct monetary policy through open market operations in these instruments. ladies and gentlemen, in developing economies debt markets which include public entities ( ministries of finance, central banks and specialized government agencies for housing, agriculture, export and industry ), are the most creditworthy borrowers and generally dominate the issue of local currency debt.

and the enhancement of long - term shareholder value with the highest standards of integrity and ethics. each director, as well as each member of senior management, is therefore expected to lead by example in a culture that emphasizes trust, integrity, honesty, judgment, respect, responsibility and accountability. ” the guidelines for this principle essentially call upon the board to ensure that senior management implements strategic policies and procedures that are designed to promote good and acceptable ethical behaviour. principle 3 – board responsibilities and composition “ the board of directors ’ role is to oversee the proper functioning of the institution. in order to achieve this, the board shall have clear, well - defined and understood responsibilities. there shall be a balance of skills, knowledge, experience and perspectives among directors so that the board works effectively to ensure the long - term safety and soundness of the institution. ” the guidelines in this respect expect the board of directors to exercise professionalism by having a formal charter that sets out its responsibilities, having a rigorous formal processes for evaluating its performance along with that of board committees and individual directors and, ensuring that the institution complies with all relevant laws, and codes of business practice, and that it communicates with its shareholders and relevant stakeholders openly and promptly principle 6 – roles of senior management “ it is the responsibility of management, under the direction of the chief executive officer, to conduct the institution ’ s business and affairs in an effective, responsible and ethical manner, consistent with the principles and direction established by the board through the strategic plan. ” apart from reflecting integrity in their management of the institution, the guidelines for this principle require that senior management be appropriately qualified to run the affairs of the institution. the expectation is that people of appropriate qualifications will reflect the professionalism that is required of their respective professions. principle 7 – reporting and disclosure “ the board shall demand integrity both in financial reporting and in timeliness and balance of disclosures on the institution ’ s affairs. ” the guidelines for this principle require that the institution ’ s financial statements fairly present the state of affairs of the institution as at the end of the financial year and the profit or loss and cash flows for the reporting period. furthermore, the annual report is expected to state whether the corporate governance guidelines have been adhered to or, if not, where there has not been compliance the institution is expected to give reasons. mr chairman, as you will note the four principles highlight the fact that the bank of zambia places a great deal of importance on integrity and professionalism in the financial