trust. the role of bankers ’ self - interest having identified possible actions bankers can take to restore trust, an important question remains. why should bankers ever take such actions? is it in their own interest? as i stressed before, trust is essential for the functioning of the banking sector. without trust, banks cannot function properly. this not only has negative consequences for the rest of the economy, but also negatively affects banks themselves. there are several channels through which a lack of trust negatively affects banks. first, it is a potential root cause of crises. crises usually lead to a significant and often long - lasting contraction in bank profits, as can be seen, for instance, from the large drop in the s & p 500 index for the banking sector. moreover, they are usually followed by an “ aggressive ” regulatory response to constrain banking activities. second, a lack of trust negatively impacts on the relationship between regulators and banks. the interaction tends to become more adversarial. regulators become less willing to listen to bankers and to take their views on how to do business into account. third, a lack of trust in some banks and bankers usually translates into a negative sentiment towards the entire industry. this, in turn, has negative implications for business. customers may leave, and it is more difficult to recruit talent. but this negative sentiment not only has repercussions for banks ’ business prospects, it also affects the social standing of bankers, whose image is often tarnished in society. concluding remarks let me conclude. the recent crisis is a stark reminder that banking is trusting. the dramatic changes in the banking environment brought about by financial innovation and technological progress have not diminished the role of trust in banking. any lack of trust significantly impairs the functioning of the banking sector and prevents banks from contributing to economic growth. a lack of trust also negatively affects banks ’ business and profitability. it is in the banks ’ collective interest to restore and preserve a high level of trust in, and within, the banking sector. rebuilding trust is a long and complex process. it certainly requires effort on the part of regulators and supervisors, and a lot has been achieved there. but, ultimately, as the analogy with the trust between doctors and patients makes clear, most of the heavy lifting will have to be done by the banks – their senior managements, boards and shareholders – themselves. there is plenty that they can do and should be doing. bis central bankers ’ speeches

the management of systemic risks is of importance. in assisting countries to deal with the unintended consequences of these excessive capital flows in a manner that promotes sound policies and strong frameworks – including monetary policy and exchange rate flexibility – as the first line of defence against excessive capital flows, the imf published a guidance paper titled “ the liberalization and management of capital flows : an institutional view 5 ”. south africa ’ s approach to capital flow management has been broadly in line with the imf ’ s institutional view. we have adopted a relatively hands - off approach to managing capital inflows, allowing the exchange rate to act at as a shock - absorber, while monetary policy is not focused on the exchange rate but rather on the possible inflationary implications of exchange rate movements. as you know, the organisation for economic co - operation and development ( oecd ) is currently reviewing its code of liberalisation of capital movements ( code ). the imf is also participating in the review of the oecd code. continued cooperation between the imf and the oecd remains crucial for addressing any perception that countries might receive seemingly conflicting signals, or policy advice, regarding the appropriateness of capital flow measures. additionally, the support from the imf through the establishment of the data gaps initiative framework, aimed at supporting enhanced policy analysis of risk in the financial sector as well as an analysis of vulnerabilities, interconnections and spillovers, including cross - border risks, promises to be of great use. let me now address the second issue, which has to do with the adequacy of the global financial safety net ( gfsn ) at national, bilateral, regional and global level. members of the g20 have agreed to collaborate closely to advance cooperation and form consistent policy stances with the aim of advancing structural reforms, fostering economic resilience, promoting infrastructure investment, and promoting the stability of the international financial architecture – all to enforce stronger, more sustainable, more balanced, and more inclusive growth. imf policy paper, 14 november 2012. “ the liberalization and management of capital flows : an institutional view ” page 6 of 8 in this regard, the imf could assist by applying a consistent approach to the monitoring and surveillance of countries to help identify potential risks and shocks that could emanate from the global financial system. the g20 hamburg action plan called on “ the imf to further enhance the effectiveness of its lending toolkit in line with its