quarter of 1997 to 12. 2 per cent in the third quarter. another monetary aggregate which is of great importance for the reserve bank is the amount of liquidity available in the banking sector as reflected in the amount of loans banking institutions seek from the reserve bank ’ s discount window every day. this amount declined from a daily average level of r10. 6 billion in march 1997 to r5. 3 billion in october, indicating that the lower rate of increase in the demand for credit was no longer absorbing the increases in liquidity arising from the large net capital inflows from abroad. the banks no longer needed large amounts of reserve bank assistance for most of the time. these trends in monetary conditions were also reflected in interest rates which first rose quite substantially last year but then declined since the beginning of 1997. the rate on bankers ’ acceptances with a maturity of three months declined from 16. 2 per cent at the end of january 1997 to 14. 2 per cent on 25 october. satisfactory developments also occurred in the international financial aggregates over the past twelve months. the net inflow of foreign capital gained momentum again towards the end of 1996. during the first three quarters of this year, the total net capital inflow amounted to almost r20 billion. net purchases of bonds and equities by non - residents amounted to about r34 billion, which enabled south african residents, mainly institutional investors, to switch a further r17 billion of their south african portfolios into foreign currency denominated assets. the relatively large net capital inflows during the first three quarters of 1997 exceeded a smaller deficit on the current account of the balance of payments and enabled the reserve bank and the private banking sector to increase their holdings of short - term foreign assets. at the end of september 1997, the total gross gold and other foreign exchange reserves held by the combined banking sector amounted to an estimated r33. 6 billion, or the equivalent of about 10 weeks ’ imports. these favourable overall balance of payments developments contributed to a more stable exchange rate for the rand. after depreciating by almost 22 per cent in 1996, the nominal effective exchange rate of the rand, measured against a basket of the currencies of south africa ’ s major trading partners, depreciated by less than one per cent from 31 december 1996 to 31 october 1997. larger depreciations against the us dollar and the british pound were neutralised by appreciations against most of the european currencies and the japanese yen

and fairer, two objectives that i strongly support. in doing so, i am not opposed to changes that make sense, based on the experience we have gained from applying existing rules and approaches, or prompted by new and emerging issues. as always, we should ensure that any further changes yield significant improvement to safety and soundness at reasonable cost and seek to avoid approaches that fail to consider the tradeoffs between cost and safety. in forming my judgments about whether proposed changes in regulation meet the standard i have just laid out, i will be guided by the four principles i described in 2021, outlining my perspective on bank regulation and supervision. 1 i would like to briefly 1 / 8 bis - central bankers'speeches discuss these four principles, and then talk about how they have guided and will guide my thinking on a number of issues important to large bank supervision and regulation. the first principle is that bank regulation and supervision should be transparent, consistent, and fair. combined, these three elements, which we can think of collectively as due process, build respect for supervisory practices, and in doing so, make supervision more effective and encourage open communication between banks and supervisors. this principle applies equally to regulation. supervision cannot replace - and should never supersede - rulemaking. published regulations that have gone through the rulemaking process, with solicitation of public comment and bona fide engagement with the issues raised, are the best and clearest way for banks to understand the rules of the road and for the bank regulatory agencies to ensure banks satisfy safety - andsoundness objectives. this brings me to the second fundamental principle for regulation and supervision : striking the right balance between ensuring safety and soundness, on the one hand, and promoting acceptable and manageable risk - taking, including encouraging responsible innovation. to put it simply, this means matching regulatory and supervisory requirements to the risks presented. for the largest banks, this naturally includes an increased focus on financial stability risks. there are obvious risks from under - regulation, and it is those risks that were addressed in the wake of the financial crisis 14 years ago. but we sometimes overlook the significant costs to our economy, and risks to safety and soundness, from overregulation, where rules are not designed and calibrated to address the actual risks. in a time of rising interest rates that could constrain credit, it is especially important to ensure that regulation and supervision not add costs and burdens for banks with little or no benefits to safety and sound