. i will then discuss two state - of - the - art quantitative models that we have developed to improve our assessment of risks to the canadian financial system. the multiple dimensions of systemic risk systemic, or system - wide, risk goes beyond individual institutions and markets. it is the risk that the financial system as a whole becomes impaired and that the provision of key financial services breaks down, with potentially serious consequences for the real economy. bank of canada annual conference on “ the evolving financial system and public policy ” held in december 2003 in ottawa. bis central bankers ’ speeches systemic risk manifests itself in different ways. there is a time dimension, which refers to the accumulation of imbalances over time, and a cross - sectional dimension, which refers to how risk is distributed throughout the financial system at a given point in time. procyclicality is the key issue in the time dimension. it reflects the tendency to take on excessive risk during economic upswings – too much punch from the punchbowl, if you will – and to become overly risk averse during the downturns. procyclicality makes the financial system and the economy more vulnerable to shocks, and increases the likelihood of financial distress. risk concentrations and interconnections are the key issues in the cross - sectional dimension. financial institutions can have similar exposures to shocks or be linked through balance sheets. as a result, losses in one institution can lead to fears of contagion that amplify the adverse effects of the initial shock. for instance, uncertainty about the viability of counterparties can lead to hoarding of liquidity, which may seem like an appropriate action for the individual institution but can have disastrous consequences for the financial system as a whole. system - wide surveillance requires that we regularly assess the importance of various types of systemic risk. how we judge a particular risk will be based on the probability that it will lead to financial system distress, and on the extent of its impact should that distress materialize. early - warning indicators a fundamental challenge is to detect the risks arising from both global and domestic sources in an environment with a vast number of potential indicators. therefore, one direction of research at the bank has been to isolate the key signals from this broad information set by identifying a smaller group of variables that can serve as early - warning indicators of emerging imbalances. since financial crises in canada have been rare, international data are used to help establish numerical thresholds for each domestic indicator. for example

18million ). increased participation in both the money and capital markets by non - bank financial institutions with proposals for issuance of other corporate bonds are also under current consideration. mr chairman, some of the key sectors with potential investment include agriculture, mining, manufacturing, tourism and energy. mr. chairman, given all these developments which i have cited, one can tell that there are enormous possibilities for the financial sector in zambia. in this regard, our expectation, at the bank of zambia, is that the financial sector should take a leading role in facilitating further developments in the areas which i have discussed. however, during our interactions, key players in the financial sector have informed us that they have a limited capacity to provide the required services in this regard. this forum has therefore been organized and arranged by the bank of zambia to bring together zambian financial sector players and international financial players who have an interest to see that zambia takes its rightful place in the world economy. our expectation is that after this forum, we shall see the emergence of an interactive and symbiotic alliance between international and zambia financial institutions whose goal will be to provide financial services that will uplift the well - being of the zambian populace at large. this sounds like a difficult task to achieve but it is my conviction that it is better to begin a step towards this direction rather than waiting for it happen in future. on a lighter note, ladies and gentlemen, let me remind you that the soccer world cup to be hosted by south africa in 2010, has attracted increased demand in the construction and tourism sectors in the whole southern african region. zambia needs to take advantage of this and invest heavily in the tourism industry to benefit from the event ; particularly that it has a vast number of national parks and the victoria falls, one of the seven natural wonders of the world. obviously this can only be done if there is long term partnerships between local financial institutions and international financial institutions like the ones invited here today. mr. chairman, ladies and gentlemen, i thank you for your attention.