address by lesetja kganyago, governor of the south african reserve bank, at the 14th bcbs - fsi high - level meeting for africa on ‘ strengthening financial sector supervision and current regulatory priorities ’ cape town, south africa, 31 january – 1 february 2019 introduction good morning, ladies and gentlemen. i am pleased to once again welcome you to south africa, cape town for the 14th basel committee on banking supervision ( bcbs ) – financial stability institute ( fsi ) high - level meeting for africa on ‘ strengthening financial sector supervision and current regulatory priorities ’. allow me to first thank you all for attending this meeting, which has become an important annual event for the south african reserve bank, bcbs, fsi as well as representatives from other various sub - saharan african central banks and supervisory authorities. i hope that this meeting will be as successful as the past meetings we have had over the years. importance of financial sector regulation before we get bogged down in very technical discussions around financial sector regulation and our regulatory priorities, it is important that we first remind ourselves of the policy imperatives behind the need to continuously strengthen the regulation and improve the resilience of our financial systems. the financial sector plays an important intermediation role in the economy – by allocating capital from savers to borrowers, managing financial risks, facilitating trade, as well as offering access to the payment system. financial intermediaries and financial markets play this role by moving funds throughout the economy that in turn affect businesses and the production of goods and services1. a financial system is therefore the lifeblood of a modern economy. inclusive growth and sustainable development objectives would not be achieved without a stable and well - functioning financial system. the 2008 global financial crisis highlighted the strong connection between the financial sector and the real economy and the extent to which challenges in the financial sector can have negative effects on the real economy. while the financial crisis originated in developed countries, it negatively impacted on most of the emerging market and developing economies, in very significant ways. on our continent, the effects were “ reforming the financial system in sub - saharan africa : the ( long ) way ahead ”, peter gakunu, 2007 particularly felt through reduced foreign investment, trade and remittances. the crisis exhibited itself in growing budget and trade deficits, currency impacts, higher rates of inflation, increasing public debt and dwindling currency reserves 2. so to reiterate, a stable and well - regulated financial sector is vital for

the achievement of our long - term sustainable economic growth and developmental objectives. given the growing interconnectedness of financial markets, international financial stability has become a global public good. despite governments, central bankers and regulatory bodies mainly operating in their respective jurisdictions, we need to recognise that some of the decisions we make in our own jurisdictions can have global reach. in order to achieve a stable global financial system, coordination and cooperation becomes important. our gathering here is one such form of coordination and cooperation towards the strengthening of our financial sector supervision and contributing towards a more resilient and safer global financial system. the interactions here, the sharing of ideas and experiences as well as the fostering of professional relationships will make the regulation of our financial sector better. financial sector development in africa the financial system in sub - saharan africa is generally bank based and somewhat less sophisticated than our developed country counterparts, with countries on different levels of development. however, there has been remarkable progress over the past two decades. while the emergence of non - bank financial institutions and other alternative sources of capital, such as stock markets has been noticeable, with the exception of a few, financial systems are still dominated by informal finance and traditional banks, most of which are state or foreign - owned. the banking sector in africa is undergoing reforms focused on privatisation and other forms of restructuring with respect to state - owned banks, with a view of improving the quality of the banks3. a review of the sub - saharan africa banking system published4 by the imf in 2013 makes the following observations : banking systems account for the preponderance of financial sector assets and activities ; the depth and coverage of financial systems – as measured by the ratios of broad money ( m2 ) and private sector credit to gdp – have been gradually increasing over the past decade, albeit from a low base ; the scale of financial intermediation in the region remains significantly lower than in other developing regions of the world ; access to financial services is also relatively low, reflecting a combination of low income levels, small absolute size, and infrastructure weaknesses ; 2 the economics student society of australia, julia pham, 2017 3 “ review african financial systems : a review ”, franklin allen etal, finance department, the wharton school, university of pennsylvania, 4 banking in sub - saharan africa : the macroeconomic context, montfort mlachila, seok gil park, and masafumi yabara, washington dc, imf, 2013 most banking systems are small in absolute and relative