amending the act, the bank ’ s primary role was solely “ to formulate and implement monetary and supervisory policies that will ensure the maintenance of price and financial system stability ”. this was deliberate, as experience world - over has shown that you can only achieve sustained and high economic growth in an economic environment characterised by low and stable inflation. thus, by working to ensure price stability as well as maintenance of a safe, sound and efficient financial sector, the bank is contributing to the achievement of sustainable economic growth and, ultimately, poverty reduction. in a nutshell, following the amendment of the bank of zambia act in 1996, the bank ’ s main responsibilities comprise price and financial system stability. the bank ensures financial system stability by licensing, supervising and regulating the activities of banks and non - bank financial institutions so as to promote the safe, sound and efficient operations and development of the financial system. ladies and gentlemen, i trust that, as members of unzabeca, you have actively participated in these series of lectures and expanded your knowledge of the functions of the bank of zambia. on our part as bank of zambia, we strongly encourage investment in education, which has been demonstrated by the sponsorship of these lectures. in this regard, i wish to take this opportunity to call upon other institutions to support our university by either sponsoring a series of lectures, like the bank of zambia has done, or rendering any financial assistance. as many of you may be aware, most of the companies in zambia have benefited, in one way or the other, from the services offered by our universities. as for the bank of zambia, most of its management members of staff, including myself, are graduates of this university and were members of unzabeca. therefore, as a token of their appreciation to unzabeca, they have made a generous donation in the sum of k9. 5 million. this donation, i hope, will go a long way in supporting unzabeca programmes. however, may i caution you to manage these funds prudently and ensure that they are applied towards the attainment of the intended unzabeca objectives. please, do not be wasteful now that unzabeca coffers are liquid! in conclusion, as patron of unzabeca, i look forward to being involved in unzabeca activities. in this regard, i undertake to promote your activities, at any slightest opportunity, to other institutions, which would benefit from your services. with these

ways. first, we could improve the resolution mechanisms for large, complex institutions and thereby reduce the costs associated with failure. a more robust resolution regime would make it more feasible to allow the failure of a large financial institution without that failure threatening the stability of the entire financial system. second, we could impose higher capital requirements on large, systemically important institutions to offset the advantages such as lower funding costs that these institutions may garner by their perceived “ too big to fail ” status. this would recognize the interconnectedness of the financial system and the fact that the failure of a systemically important institution generates significant externalities, which are not, at present, borne fully by the equity and debt holders of such institutions. increasing the size of the capital buffer would make the system more stable by reducing the incentive for firms to get big just to capture the perceived benefits from achieving “ too big to fail ” status. the first change – an improved resolution mechanism – would presumably reduce the number of institutions that – at any point in time – would be systemically important. the second change – the imposition of higher capital requirements on large, systemically important institutions – would reduce the likelihood of failure of such institutions. however, in assessing the efficacy of such changes, we need to be realistic about the difficulties in building a resolution regime that would be sufficiently robust to allow the failure of any institution under any circumstance and in designing a capital regime that imposes differential requirements on large, systemically important institutions. on the resolution regime side of the ledger, it is particularly difficult to build resolution regimes that can operate effectively across different geographic jurisdictions. legal regimes are different ; national authorities have different incentives ; and coordinating resolution across multiple geographies in a way that treated counterparties in different jurisdictions equivalently would be a daunting mission. similarly, designing an effective capital surcharge for systemically important institutions will be very challenging. broadly, there are two approaches. we could either require a set of firms identified to be systemically important to hold additional capital or we could introduce a capital surcharge for firms linked to measures of systemic risk. in broad terms, the factors that could be used to identify systemically important financial institutions would be related to a firm ’ s interdependence with the financial system and the impact on market confidence should the firm become distressed. measures of size, leverage, liability structure and importance in credit formation and liquidity provision could all be indicators of systemic importance. developing a consistent, objective set