. basel iii requirements are not of a macro - prudential nature, but like previous basel requirements, are aimed at the balance sheets of commercial banks and could therefore impact economic activity and hence monetary policy. i would like to focus specifically on the liquidity framework which requires banks to adhere to a new liquidity coverage ratio ( lcr ) to ensure that they have sufficient high - quality liquid assets to survive a month - long significant stress scenario. the lcr aims to ensure that banks maintain an adequate level of unencumbered, high - quality liquid assets that can be converted into cash to cover net outflows during the period of stress. interview with olivier blanchard, imf survey magazine, imf explores contours of future macroeconomic policy, february 12, 2010 monetary policy in a world with macro prudential policy, speech by jaime caruana, general manager of the bis, at the saarcfinance governors ’ symposium 2011, kerala, 11 june 2011 bis central bankers ’ speeches in south africa, like in other countries, the basel iii liquidity regulations aim to reduce the reliance of banks on short - term funding. south africa has very large and persistently high levels of income inequality, as reflected by a high gini coefficient of over 60. it is not surprising therefore, that households saving is very low, and that a large portion of the population is unable to make a significant contribution to national savings. gross saving by the household sector has been around 1. 6 per cent of gdp over the past two years. consequently, national savings are concentrated in wholesale savings, resulting in a structural constraint, in that banks rely heavily on wholesale funding rather than retail deposits. the relatively high reliance on wholesale funding, increases the requirement in terms of both the lcr and the other component of the liquidity framework under basel iii, namely the net stable funding ratio ( nsfr ) 6, and therefore will result in a higher cost of funding for domestic banks. there is a double whammy, however, because at the same time, the opportunity cost to acquire high quality liquid assets will imply that there will be a decline in the supply of loanable funds. implementing the basel liquidity risk standards in south africa could reduce the availability of long - term credit, particularly in south africa where assets that meet the basel iii qualifying criteria for the new lcr are in short supply ( paradoxically also as a result of having pursued responsible fiscal policies and avoided excessive government debt ).

area in the past for most african central banks due to the region ’ s relatively low credit depth and its lack of large, sophisticated financial markets. but the rapid development of the financial sector, the growing interconnectedness of the countries ’ banking systems, and the gradual opening of their capital markets has necessitated an increased focus on financial stability. the imf recently found evidence of linkages – in particular in the case of sub - saharan africa countries – between lower commodity prices and financial stability metrics, such as non - bis central bankers ’ speeches performing bank loans, returns on equity, and ratios of liquid assets to deposits. despite these linkages, it is evident that a growing financial system which is well regulated and supervised is likely to result in better allocation of capital to different economic sectors, the facilitation of entrepreneurship, stronger job creation and, overall, the promotion of sustainable economic development. dealing with challenges – the experience of the south african reserve bank the global challenges described above, and the questions of how to deal with them, have not spared the south african reserve bank. south african growth has slowed due to various external factors, not least due to the worsening terms of trade on the back of softer commodity prices. it is worth noting that commodity exports continue to represent about 60 per cent of south africa ’ s external trade but trade is increasingly shifting to other emerging - market economies, for example export shipments to china and the other brics countries have risen from 2, 6 and 3, 0 per cent in 2005 to 9, 6 and 5, 2 per cent in 2014 respectively. these external factors have been compounded by domestic supply issues, prominent among which were electricity constraints, prolonged strikes in the mining and manufacturing sectors as well as skills shortages and uncertainties in certain fields of policy, such as the mining and agricultural sectors. the south african reserve bank forecasts gdp growth of 1, 5 per cent this year and 1, 6 per cent next year, which is substantially lower than the post - recession high of 3, 2 per cent in 2011. the bank further estimates that a part of this deterioration may be structural and that potential economic growth has slowed from around 3 to 3, 5 per cent in 20105 to about 1, 8 per cent this year. inflation continues to remain of some concern, even as growth slowed and the persistence of a negative output gap seemingly dampened the pass - through effects of currency depreciation to headline cpi inflation. core consumer price increases have remained relatively elevated