. india ’ s reserves are the world ’ s seventh largest at over usd250 billion. while south africa ’ s are but a fraction of this, one needs to bear in mind that we have moved from a position of a negative net open forward position of almost usd26 billion at the end of 1998, to positive net reserves of us $ 28 billion, the result of which means that today the country boasts an investment grade rating. furthermore, central banks have shifted towards market - based instruments which enhance their ability to respond to shocks. india is one such example, with the increased use of repo and reverse repo operations since the early 2000s, increasing the role of interest rates in the transmission mechanism of monetary policy. in south africa ’ s case, we have come a long way in terms of the development of our own bond market, a process in which the south african reserve bank played a major role for a very long time. today, we have a very deep and liquid bond market, if not the most liquid bond market in the emerging market economies. the positive impact of these financial market and macroeconomic developments have been put to the test on numerous occasions since the 1997 / 1998 crisis. the most recent event has been that of the us sub - prime mortgage market. this episode has been well documented and i shall therefore not spend time on its detail. as you are aware, it was a liquidity and credit crisis, emanating from financial institutions having exposure to the sub - prime market and thereby incurring huge losses as delinquencies and foreclosures increased in the wake of tighter monetary policy. although the sub - prime mortgage market was an issue related to the us, the adverse developments were transmitted to other developed and emerging markets without much relation to domestic developments. at the height of the crisis, developed and emerging market equities were sold. foreign exchange markets witnessed a significant increase in volatility as carry trades were rapidly unwound and emerging market spreads rose significantly between late july and mid - august. however, the rise in emerging market debt spreads was not quite as pronounced as that of credit markets in developed economies. spread movements also reflected higher risk credits moving the market in either direction. although south african financial markets were affected by the events surrounding the subprime crisis, our money markets were relatively unaffected. our banking system had very little exposure to the sub - prime market and liquidity conditions domestically remained healthy. as such, there was no need for the

visible to external parties such as regulators and market participants. the new guideline on corporate governance has thus, attempted to circumvent these shortcomings and uphold the three principles underpinning good corporate governance, namely integrity, transparency and accountability. the guideline emphasizes the responsibility of boards, their accountability as well as that of the chairperson who leads the board. the quality of the people sitting on boards and comprising senior management of financial companies has a direct bearing on the way these institutions are managed. the guideline, therefore, whilst ensuring that directors meet the fit and proper person criteria, further prescribes for the leadership skills enhancement of board directors. poor leadership has undermined public confidence in financial institutions during the crisis and has provided many painful but precious leadership lessons to one and all. the orientation program for directors outlined in the guideline addresses the issue of leadership by ensuring that directors are fully conversant with the principles of leadership, and the leadership training programme has to be approved by the bank of mauritius. i am pleased to announce that this workshop has been duly approved by the bank. the crisis also brought to light the importance of inculcating a corporate culture which promotes ethical principles. culture has been described as “ the way human beings behave together – what they value and what they celebrate. ” the banking crisis revealed a breakdown of the values that promote trust and led to a crisis of confidence in banks. regulation can propel a change in culture when it is otherwise not feasible, as rightly expressed by the chief executive of the uk, financial services authority who stated that the regulator can influence culture by “ influencing the composition of management, influencing incentives for good behaviour, influencing training and competence regime and deterring poor behaviour. ” bis central bankers ’ speeches the guideline on corporate governance, thus imposes the responsibility on directors and senior management to lead by example in an environment that emphasizes trust, integrity, honesty, judgment, respect, responsibility and accountability. culture can only be effective when combined with strong leadership. for corporate governance principles to be really effective, the tone must be set from the very top of the organization in order that these principles trickle down to the lowest level of the organization to ensure compliance. the board should actively sustain an ethical corporate culture in the organization. further, strategic plans and procedures have to promote ethical balance, fair dealing practices must be applied, and a code of ethics must be laid down and communicated to all the members of the organisation. the guideline on corporate governance not