crises and how to deal with them. in this regard, the sarb has taken a number of significant steps towards strengthening south africa ’ s resolution framework over the past year. two separate but related projects were initiated in this area, namely to implement a resolution framework and a deposit insurance scheme. the resolution framework, once promulgated into law, will bring south africa ’ s resolution framework in line with the financial stability board ’ s key attributes for effective resolution regimes. this framework will also formalise the sarb ’ s role as the resolution authority, and will outline the responsibilities with respect to the orderly resolution of designated financial institutions. meanwhile, the imminent establishment of the corporation for deposit insurance ( cdi ), as a subsidiary of the sarb, will provide explicit guarantees to protect depositors should a bank ever fail. as a result, not only will depositor confidence in the banking system be enhanced ; the cdi will also assist government that, in the past, may have compensated depositors with taxpayers ’ money. financial sector supervision and regulation as you will recall, the fsr act lays the foundation and the financial system regulatory architecture of the twin peaks model. the twin peaks regulators, being the financial sector conduct authority ( fsca ) and the prudential authority ( pa ), work alongside the sarb and other regulatory bodies to ensure the stability of our financial system for the well - being of all south africans. the pa was established on 1 april 2018 and has been operating within the administration of the sarb, as prescribed by the fsr act. while much of its first year was spent on refining and implementing the integrated framework for supervision, including assuming responsibility for the insurance industry and market infrastructures, the pa also had to complete the resolution of vbs mutual page - 7 - of 9 bank. on 25 june 2019, the pa released its first annual report, which reflects all its activities for the 2018 / 19 financial year. the proposed nationalisation of the south african reserve bank the debate about the proposed nationalisation of the sarb continues in the public domain, fuelled by perceptions that private shareholders have control over the central bank. the sarb has clarified, on a number of occasions and through various communication channels, that its private shareholders participate as preference shareholders and do not own or control the sarb, nor do they influence monetary policy or any of the other regulatory functions. let me reiterate what i have repeatedly been saying in the public domain : the board of the sar

adrian orr : a prosperous but vulnerable nation excerpt from an address by mr adrian orr, deputy governor of the reserve bank of new zealand, to the new zealand society of actuaries, napier, 17 november 2004. * * * reserve bank deputy governor adrian orr is warning that the rise in new zealand ’ s external debt in recent years stresses the need for policies to promote the soundness of the financial sector. that ’ s come in a speech in napier to the new zealand society of actuaries entitled “ a prosperous but vulnerable nation ”. the following is an excerpt from that address. “ when we talk about the risks of indebtedness, it is important to remember that new zealand is a reasonably prosperous nation. we can take on a certain amount of debt with comfort, and in some cases it is sensible to do so. the growth in borrowing in the last decade has not, in itself, raised the odds of a major financial crisis. but if things do go wrong, the losses from such a crisis could be severe - and more so now than they would have been, say, ten years ago. “ the reserve bank ’ s interest in this area stems mainly from two features of borrowing behaviour in new zealand. first, new zealand relies heavily on funds borrowed from offshore, and a large and increasing share of these funds is channelled through the banking system. this channel has become more industry and geographically concentrated : just four australian banks now own 85 per cent of new zealand ’ s banking system assets, and they also perform some of the key functions of their new zealand operations. in a banking sector crisis, an interruption to these intermediation services would create disruptions across the whole economy. “ second, a great deal of the funds raised offshore end up as household debt. in normal times, households are quite capable of managing their own balance sheets, and their decisions about spending, saving and investment may well be rational. but there is always a risk, albeit small, of a major economic shock that could leave many households without any income to service their debts. “ ideally, households would have used the recent run of strong economic growth to build up a buffer against such an event ; instead, they have tended to leverage up further and invest more heavily in a few domestic asset classes, especially housing. the result is that a major shock could result in more defaults and heavier losses for banks and other lenders. “ for policymakers, the stakes are higher now than they have been in the past