better understand the risks they face, we tailored our rule for these institutions to take account of differences in size, complexity, and business models. we specifically exempted community banking organizations with $ 10 billion or less in total assets from the requirement that they run their own stress tests as those institutions cannot reasonably be expected to have the resources that larger banks devote to stress testing. 11 benefits and challenges of stress testing as already noted, stress testing has a number of important benefits as a supervisory tool. from a microprudential perspective, the ccar provides a structured means for supervisors to assess not only whether banks hold enough capital, but also whether banks are able to rapidly and accurately determine their risk exposures, an essential element of effective risk management. the cross - firm nature of the stress tests also helps supervisors identify outliers – both in terms of results and practices – that can provide a basis for further, more targeted reviews. from a macroprudential perspective, the use of a common scenario allows us to learn how a particular risk or combination of risks might affect the banking system as a whole – not just individual institutions. this experience with stress testing has indeed been very useful for our efforts to better monitor and evaluate potential systemic risks. for example, in our macroprudential work, as in our stress tests, we tend to rely on horizontal examinations and comparative studies, as opposed to firm - by - firm assessments ; we use multidisciplinary, specialized teams to supplement the work of on - site examiners ; and we have increased our use of modeling and quantitative methods, using data drawn from different institutions and time periods. all of these features are apparent in the workings of our large institution supervision coordinating committee, which provides coordinated oversight of the supervision of systemically important firms. we have also extended the lessons of systemwide stress testing to analysis of factors other than capital : for example, we recently completed a horizontal review of liquidity positions and liquidity risk - management practices at some of the largest ccar firms. like the ccar review of capital planning, this review was a multidisciplinary effort that used quantitative information – in this case, detailed data on firms ’ liquidity positions – as well as qualitative information on liquidity risk - management practices. notwithstanding the demonstrated benefits of comprehensive stress testing, this evolving tool also presents challenges. for example, even as we continue to explore ways to enhance the transparency of the models we use to estimate banks ’ projected revenues and

t t mboweni : origins and causes of recent financial market turbulence and its implications for the cma speech by mr t t mboweni, governor of the south african reserve bank, at a public lecture, windhoek, namibia, 4 april 2008. * * * introduction thank you for your kind invitation to speak to you about the recent financial market turbulence and its implications for the common monetary area of lesotho, namibia, south africa and swaziland, or cma. as you may know, this morning the governors of the four cma central banks had a meeting which was hosted by the bank of namibia to discuss matters of mutual interest and exchange observations on economic developments in the region. it is always a delight to visit namibia, renowned for its friendliness, and this lecture gave me an excuse to extend my visit to your beautiful and super - tidy capital. unfortunately, one should add a footnote to the reference in the topic of my lecture to the “ recent financial market turbulence ” : as we are all aware, the turbulence is still ongoing. i will first touch upon the build - up to the turbulence in the international financial markets, and use a number of indicators to illustrate the turmoil. this will be followed by some observations regarding international policy reactions to the disturbances. thereafter i will pinpoint a number of key implications for the cma, before concluding. the development of the turbulence in the international financial markets significant developments in the global economy seldom start in isolation. rather, most episodes are extensions of or reactions to previous episodes. with any analysis, one has to start somewhere – but be mindful that important dimensions may be lost by doing so. we can largely trace the origins of the current turmoil to the united states ( us ) housing market. i would like to go back to the mid - 1990s, when property prices in the us started rising alongside increasing income levels and positive demographic influences on the demand for housing. this upward momentum continued, despite the sharp fall in prices in major share markets early in 2000. partly in order to stem the negative impact of the share price decline on economic activity, monetary policy became accommodative in the us. this attempt at moderating the slowdown in economic activity seemed to be successful. at the same time, the low interest rates and rising levels of income bolstered the real - estate market, with house prices in the united states going from strength to strength. a long period of rising prices creates an expectation that the trend