expected credit loss accounting standard, namely the international financial reporting standard 9 ( ifrs 9 ), has resulted in a deterioration in the quality of credit on bank books. furthermore, as persistently low domestic economic growth starts to page - 5 - of 9 have an increasingly tangible impact on the balance sheets of both households and corporates, credit quality may be expected to deteriorate further. during the course of 2018, the sarb undertook stress tests on six major banks to assess the resilience of the banking sector to hypothetical yet extreme macroeconomic shocks. the outcome of the 2018 common scenario stress test exercise suggests that, at an aggregate level, the south african banking sector would be able to withstand the possible materialisation of a confluence of the main financial stability risks. with respect to solvency, the banks were assessed to be capable of maintaining their capital levels above the minimum capital adequacy requirements, under the adverse macroeconomic scenarios considered. the sarb also discovered that no material risks were emanating from the liquidity positions of the six major south african banks. the sarb regularly conducts an assessment of the prevailing financial stability risks. these assessments are reported to the financial stability committee ( fsc ) and published biannually in the financial stability review ( fsr ). the risks identified since the second quarter of 2018, which currently form part of the sarb ’ s assessment, include : a deteriorating domestic fiscal position, exacerbated by, among other things, weak domestic growth, a poor revenue outlook, and the fragile financial positions of soes ; spillovers from weaker global economic growth ; the possibility of renewed and unexpected tightening in global financial conditions and the subsequent potential rapid repricing of risk ; and rising cyber - dependency and security risks attributed to the ever - increasing digital interconnection of people, systems and organisations. the identification and monitoring of financial stability risks, while important, would be rendered ineffective if we did not have the necessary tools at our disposal to mitigate the occurrence and / or the impact of these risks. over the past few years, the sarb has been actively developing a macroprudential policy framework, complete with tools and instruments. this past year, work continued to enhance the framework and the financial stability toolkit. page - 6 - of 9 there is a saying about the best - laid plans ‘ of mice and men ’. thus, while the sarb ultimately aims to mitigate systemic risks, it also needs to plan for potential

an address by lesetja kganyago, governor of the south african reserve bank ( sarb ), at the ninety - ninth annual ordinary general meeting of the sarb shareholders south african reserve bank, pretoria 26 july 2019 global economic conditions the past year began with significant challenges for emerging markets, including south africa. in contrast to the synchronised pickup in economic growth of 2017, which had surprised most observers by its magnitude, the major economies began to display divergent growth patterns in 2018. while the united states ( us ) maintained a strong pace of growth amid a sizable fiscal stimulus and a buoyant labour market, the eurozone and japan lost some momentum. chinese demand felt the negative impact of earlier monetary and regulatory tightening. growth in world trade volumes also began to slow, a move that was exacerbated by a flare - up in trade tensions as the us slapped tariff increases on certain imports. this confluence of factors, together with negative current account and price developments in countries like argentina and turkey, resulted in downward pressure on emerging market currencies and fixed - income assets. this move was compounded by the appreciation of the us dollar, as investors anticipated a further normalisation of us monetary policy and a widening of interest rate differentials with other major economies. by early july 2018, the south african rand had depreciated by 12 % against the us dollar from its earlier peak of mid - february, a decline that extended to 25 % when the rand reached its trough in september 2018. so what has changed since then? page - 1 - of 9 some of the concerns about global growth that prevailed in mid - 2018 have proved accurate. business confidence, trade flows and economic activity have continued to lose momentum in most of the major economies. now that the impact of the 2018 fiscal stimulus has started to fade, the us is not immune to those trends. the trade tensions that sprang up more than a year ago remain unresolved, despite the june ‘ truce ’ between china and the us that prevented an immediate tariff escalation. geopolitical tensions, especially in the middle east, are adding to a climate of uncertainty that weighs on business investment decisions globally. in this month ’ s update on the world economic outlook, the international monetary fund ( imf ) is projecting global economic growth of 3. 2 % this year, compared to a forecast of 3. 9 % a year ago. support for the global economy and financial markets, however, has come in the