##rementally. this is important to ensure orderly adjustments ; avoid “ overshooting ” or over - reaction among affected parties ; and minimise unintended deleveraging. timely calibration, and where required, uplifting or introduction of other measures are critical in this aspect. the effectiveness of macroprudential measures are inherently difficult to assess. it is therefore extremely important that macroprudential measures are well - supported by effective surveillance systems and capability. this provides the agility for authorities to respond to market reactions which can often be unpredictable. very often, there will be a need to extend or recalibrate the measures to ensure that they remain effective. for example, following the implementation of the ltv ratio limit of 70 % on the third and above outstanding housing loan per individual in november 2010, we observed an increasing growth of housing loans undertaken by non - individual ( registered business ) borrowers, i. e. they used their business entities to buy properties. this was clearly a circumvention of the measures, leading to the introduction of a ltv ratio limit of 60 % on housing loans by nonindividuals in december 2011. we need to actually look at how the market reacts to the measures introduced. it can only be done if we have an effective surveillance framework. fifth, effective communication is crucial 4cs – clarity, concise, consistent and credible – core features of effective communication : i. clarity – market, investors and public typically fear the worst in absence of clear information. ii. concise – “ more ” is not always effective ; we allow for some “ constructive ambiguity ”. iii. consistent way of communication across time and different stakeholders would strengthen credibility. bis central bankers ’ speeches iv. credible – reducing misinformation helps shape and influence expectations. it may not always be possible to engage with affected parties prior to the implementation of some macroprudential policies. for example, there was a spike in the growth of average house prices in the few months leading up to the announcement of the first ltv ratio limit. this could be due to a rush to lock in financing at a higher ltv ratio prior to rumoured timing of implementation of the limit. some developers and banks also used aggressive marketing campaigns ( e. g. “ buy before the ltv ratio limit kicks in! ” ) before the effective date of the measure. in this case, we opted to impose the measures with immediate effect on the date of announcement

expenditure side ). the message signalled by the international financial markets to south africa in 1996 therefore was to restore macroeconomic equilibrium and to come to live within the means of its own production capacity, or to lift the production potential permanently to a higher level. south africa took on the challenge both ways. the financial policy reaction was : • to let the exchange rate depreciate to a level that would satisfy the markets in respect of their expectations of future sustainability. the rand depreciated by 23. 2 per cent from 15 february 1996 up to 31 october 1996 ; • to let the outflow of foreign currency payments related to the overall balance of payments deficit drain domestic liquidity from the south african banking sector. in the process, the average daily amount of the money market shortage increased from r4. 9 billion in january 1996 to r10. 6 billion in march 1997 ; • to allow interest rates to adjust to underlying conditions and to reflect the shortage of funds that developed in the markets. interest rates indeed already started moving up during the course of 1994 / 95 under the pressure of the increasing domestic demand for loanable funds. the rate on three months bankers ’ acceptances, for example, rose from 10. 15 per cent at the end of 1993 to 12. 50 per cent at the end of 1994, 14. 60 per cent at the end of 1995 and 17. 00 per cent at the end of 1996. in line with these movements, the reserve bank raised its bank rate in five steps from 12 per cent at the end of 1993 to 17 per cent in november 1996 ; • a rise in the rate of inflation became inevitable after the depreciation of the rand in 1996. the authorities nevertheless adopted a restrictive monetary policy stance to ensure that the adjustment in relative prices of tradable and non - tradable goods would not perpetuate into a long - lasting new era of high inflation. the rate of increase in consumer prices rose from 5. 5 per cent over the twelve months up to april 1996, to 9. 9 per cent in april 1997. the government ’ s response to the other part of the challenge, that is to raise the production capacity of the south african economy permanently to a higher level, was provided with the publication of the macroeconomic strategy for growth, employment and redistribution ( gear ). this economic structural adjustment programme will obviously take a longer time to produce results than the shorter - term measures introduced last year to restore business cycle equilibrium by restricting growth in