countercyclical capital buffer. this is a potential capital add - on to bank capital should the committee decide to increase the capital requirement of the banking sector as a whole during an upswing, and should the ratio of credit growth to gdp6 be above its long - term trend. this would then be reversed during a downswing. up to now, this requirement has been set at zero, as the credit gaps are very low. at present, the focus of the fsc is on identifying any vulnerabilities that could cause systemic risk. this is done by monitoring potential risks to the system through assessing various macroprudential systemic risk indicators. these indicators include macroeconomic, financial sector, market - based as well as other qualitative indicators. should any mitigating actions be required, the fsr bill provides the south african reserve bank. ( 2016 ). ‘ a new macroprudential policy framework for south africa ’. gross domestic product page 10 of 12 sarb with the powers to advise and / or direct financial regulators to take certain actions ; this is done through the fsc. having these additional responsibilities comes with its own set of challenges. the expanded mandate of financial stability in itself may have implications for central bank independence. compared to financial stability, monetary policy decisions, while not easy, are nevertheless more straightforward and better understood by the public. these decisions generally involve the use of one tool ( the interest rate ), and there is a clear objective. it is important to appreciate that financial stability is not an end in itself but rather a means to an end, generally regarded as an important precondition for sustainable economic growth, serving the constitutional mandate of the sarb. a financial stability mandate is however more complicated, as it is a shared responsibility. the political economy aspect of this comes out strongly when we distinguish between crisis prevention and crisis management or resolution. the policy tools are more directed at particular sectors, and may therefore be more politically sensitive as the distributional impacts are more apparent than in the case of monetary policy. there could be perceptions of particular institutions or sectors being favoured over others. in particular, crisis management generally involves lender - of - last - resort facilities and / or providing some sort of assistance to banks that need it. these are inevitably quasi - fiscal decisions or actions, as they either directly involve government money or could lead to losses on the central bank balance sheet, which are potentially losses for government. as we saw during the global financial crisis,

settlement position of each financial institution was calculated simultaneously and its account at the bank was credited or debited. with this settlement mode, financial institutions need only the funds equivalent to their net debit positions at the time of settlement, and thus, it is an efficient mode from the viewpoint of the management of liquidity and business operations. under this mode, however, if a single financial institution in the system were to fail to meet its obligations, all payments would inevitably be suspended. in the worst case, this would lead to a chain of defaults at financial institutions. since the total daily value of settlement via the current accounts at the bank is substantial, reaching around 120 trillion yen, the effects of this risk could be grave. in order to reduce such risk, in 2001, the bank converted the designated - time net settlement to a settlement mode in which funds transfers are made immediately and individually. this mode is called " real - time gross settlement ( rtgs ). " in rtgs, each payment instruction sent by financial institutions for a funds transfer through current accounts at the bank is settled immediately and individually upon receipt. therefore, negative effects of one financial institution's failure to pay would be limited to counterparties to that institution and would be minimized for other institutions and the overall settlement system. while this is a considerable advantage, there is an issue specific to rtgs that need to be addressed. namely, it requires financial institutions to prepare larger amounts of intraday liquidity for settlement compared with the designated - time net settlement. in the current rtgs mode, if each and every financial institution holds back its payments until it receives payments from others, there is a possibility that all system participants would end up short of funds and settlements would not be processed ( chart 6 ). if such behavior became widespread, it could lead to gridlock, and smooth settlement, the aim of rtgs, would not be achieved. the breakthrough in addressing this issue was the substantial progress in information processing technology. the bank has been working on the implementation of the nextgeneration rtgs ( rtgs - xg ) project, and is planning to introduce new functions, " queuing and offsetting mechanisms, " into the boj - net funds transfer system in october 2008 [ reference 6 ]. the " queuing mechanism " will place payment instructions in the boj - net central queue. the " offsetting mechanism " will then identify sets of payment instructions in the queue that can be offset simultaneously and settle these