form of money held exclusively in samos, the south african multiple option settlement system, which is the backbone of the national payments system. it is managed by the sarb. samos accounts are held mainly by banks, 28 currently, who transact directly with the reserve bank. they use these reserves to settle payments between each other. the total supply of bank reserves is around r220 billion, of which about r140 billion is required reserves. this is the form of money used to implement monetary policy. this r220 billion is only a fraction of the total amount of money in the economy. if you turn to our quarterly bulletin, where you will find comprehensive statistics on monetary aggregates or money supply, you will see that m3 – which is a broad measure of money, including all bank deposits and money market shares – was r4. 72 trillion at the end of 2022. the total supply of sarb money was therefore only about 8 % of total money in the economy. how is it that most money is not sarb money? why can anyone else can create money? isn ’ t that counterfeiting? in fact, money creation is a normal characteristic of a banking system. banks routinely create money through the process of making loans. it works in a very simple way. 2 a bank takes in a deposit and that deposit meets the definition of money – for example, this is the money you have in the bank. but then the bank makes a loan, for instance to someone who borrows for a car or a house. and that loan also appears as a deposit at a bank, which is also money. in this way, the act of credit creation expands the money supply. the constraint on banks is that every deposit is a promise to pay in bank reserves, which are the liabilities of the central bank. 3 banks have no power to create these and can instead only access them on terms worked out by the central bank, through its monetary policy implementation framework. this creates a powerful constraint on banks. whenever they create money, they are obliged to ensure these rands are always valued at par with bank reserves. this obligation is tested many times daily : every time a payment goes from one bank to another, this settlement is conducted through the samos system using bank reserves. so, if bank a creates money by extending a loan to a household, and that household then buys something from someone who banks with bank b, bank a will have to transfer bank reserves to

against the backdrop of the stronger global and domestic economic environment, domestic financial markets also rallied in the latter part of 2009. the zar appreciated by almost 23 % per cent on a trade - weighted basis in 2009, reversing the 23. 5 % decline recorded in 2008. this appreciating trend continued until mid - may 2010, supported by stronger commodity prices, the search for yield, liquid domestic markets, a relatively favourable economic and fiscal backdrop and the reduction in risk aversion. the all share index, as well as the morgan stanley capital international index ( msci ) for south africa, registered double digit gains, p / e ratios improved and domestic government bond yields declined. the fixed income market was supported by the easing in monetary policy and healthy appetite for domestic bonds by non - residents. non - residents purchased a net r24 billion worth of domestic bonds in the fourth quarter of 2009 and purchased over r 30 billion in the first four months of 2010. the international bond issues of the south african government in 2009 and 2010 were also well received, as confirmed by the latest usd 2, 0 billion issue in march 2010, which realised the lowest coupon ever achieved on a usd bond issue. nonetheless, the recent bout of risk aversion caused the rally in domestic financial markets to also run out of steam, while the appreciation in the zar dissipated and volatility increased from 13 per cent in april to almost 18 per cent in may. market development initiatives an important milestone was reached in february 2010, when south africa ’ s multibillion rand money market industry officially commenced the electronic issuing, trading and settlement of securities in place of the manual paper based system. as the largest issuer of money market securities ( on our own behalf and on behalf of government ), the bank welcomed the implementation of a fully - dematerialised money market. all sarb debentures and treasury bills are now being processed in the new electronic format, representing not only a milestone for the south african financial markets, but also being the very first fully automated dematerialised settlement environment globally. many of the people here tonight were involved in this project, and i want to sincerely thank you for your contributions to this very important project. as part of the fmd ’ s own contribution to market development and to enhance our exchange of information with market participants, a platform known as the money market liaison group ( mmlg ) was initiated in 2005, mainly to consult with banks on the modifications