by regulators over firms through statutes, policies and regulations. market governance denotes the use of market based controls which discipline the corporate behaviour. while stakeholder governance alludes to the direct or indirect control by various stakeholder groups having direct or indirect interest in the corporations, internal governance refers to the institutional arrangement of checks and balances within the corporation. united nations economic and social commission for asia and the pacific, “ what is good governance ” oecd principles of corporate governance sun, willian, stewart, jim and pollard, david ; “ a systemic failure of corporate governance : lessons from the on - going financial crisis ” bis central bankers ’ speeches why is corporate governance important for financial institutions? while good governance is essential for any entity, it has deeper significance for financial institutions. there are many compelling reasons, some of which are : a. financial institutions are central to economic activity – banks and a large part of the non - banking financial system ( the shadow banking system ) undertake credit intermediation. failures of financial institutions would thus impede the economic growth and would cause serious damage to the system. economies take longer time to rebound from financial crisis than the business cycle recessions. b. financial institutions operate on a higher leverage. as per a study by the bank for international settlement ( bis ) for the period 1995 – 2009, compared to non - financial institutions that had a leverage of about 3, banks operated at a leverage of 18. 3 while non - bank financial firms had a leverage of 12. 1. higher leverage makes financial intermediaries more vulnerable to shocks. from a systemic perspective, the inheren procyclicality of the financial system leads to the build up of high leverage during upturn phase of the economy which amplifies booms and busts. therefore, while the procyclicality issues need to be dealt with from a financial stability perspective, it is apparent that these financial institutions must be well governed for achieving financial stability. c. financial institutions, especially banks, deal in people ’ s savings and trust of customers forms the cornerstone of their existence. any breach of trust leading to loss of confidence is bound to lead to a run, not just on a particular bank but on others too who are perceived to have weakness or even similar business models. the non bank financial intermediaries who lose the trust of their lenders would not be able to raise resources at a reasonable cost making it hard for them to operate efficiently and profitably. all these can lead

per cent although on a quarterly basis there was a decline over the year in durable goods consumption. government consumption expenditure growth remained relatively strong and increased slightly. from a future growth perspective, the promising aspect of the domestic expenditure growth is the increase in domestic capital formation. gross fixed capital formation increased in successive quarters, reaching 11, 5 per cent growth in the fourth quarter and 6, 5 per cent for the year in 2002 compared to 3, 2 per cent the previous year. although part of this was due to the purchases of new aircraft by saa, the expenditure related to coega and other projects was also significant. indications are that because the capital expenditure of all tiers of government is improving, there is greater capacity for delivery, and much - needed infrastructural expenditure is now taking place. the weak international environment and the stronger rand have resulted in a deterioration in the trade account of the balance of payments, which is likely to be reflected in a less favourable current account than in the fourth quarter of 2002 when a surplus of r4, 3 billion was recorded. the physical volume of merchandise exports declined by 5, 3 per cent in the first quarter of 2003. this, together with a decline in prices of merchandise exports, resulted in the seasonally adjusted and annualised value of merchandise exports falling by approximately 13 per cent over the past quarter, from r295, 9 billion in the fourth quarter of 2002 to r257, 8 billion in the first quarter of this year. net gold exports declined from r40, 2 billion to r35, 6 billion over the same period. the 10, 8 per cent decline in imports was insufficient to offset the decline in exports, and this resulted in a contraction of the trade account surplus in the first quarter of 2003 to r32 billion, from r43, 1 billion in the final quarter of 2002. looking at the market activity, the monthly average turnover on the jse securities exchange sa ( jse ) during the 12 months ending in april 2003 amounted to r75 billion. this was slightly higher than the monthly average for the preceding 12 months ( r70 billion ). the domestic equity market performed exceptionally well during the first five months of 2002, benefiting from the sound performance of the gold index. however, by the end of april this year, the monthly average share price level had fallen by 32 percent from its all - time high of 11 686 reached on 22 may 2002. the turnover on the jse increased from r