thus under - price the respective financial assets. exaggerated pro - cyclicality of this type has hit the sovereign bond market during the crisis. furthermore, in particular through the use of sovereign bonds as collateral, it has exerted adverse effects on other segments of financial markets, such as the funding markets for financial institutions. to remedy exaggerated pro - cyclicality does not mean that we should dispense with the disciplining role of financial markets. the history of the monetary union teaches us an interesting lesson : when the disciplining role of intra - euro area exchange rates was lost, volatility and tensions have in fact migrated to sovereign debt markets, where they were building up under the surface. even though markets sometimes misprice assets, they nevertheless provide a useful service in terms of signalling, price discovery and incentives. for example, if markets had not pushed up the yields of countries in weak fiscal positions, imbalances would have remained unnoticed and grown much larger, and the cost of fixing them would have been even higher. while attenuating exaggerated pro - cyclicality is important to avoid self - fulfilling expectations leading to bad equilibriums, at the same time we should recognise that markets have issued valuable signals. there are a number of ways to mitigate exaggerated pro - cyclicality of government bond markets. one way is to reduce the reliance of the financial, regulatory and supervisory framework on credit ratings. the european commission has put forward a number of proposals to this end. similarly, it is worth considering ways to delink the risk assessment of credit institutions from the credit rating of the sovereign. in addition, risk management by bis central bankers ’ speeches central clearing counterparties or ccps is of particular importance, as an increasing number of financial transactions is expected to migrate to them. the cpss - iosco principles for financial market infrastructures expect ccps to adopt forward - looking and conservative margin and haircut policies to limit the risk of destabilizing responses to changes in credit ratings. but to address the root causes of the current instability, fundamental policies will have to be adopted. the adverse feedback loop between banks and sovereigns, that i mentioned before, can be broken by establishing a true financial union : in my view this includes the creation of a pan - euro area deposit insurance fund and a pan - euro area bank resolution framework, supported by a single supervisory system with centralised decision - making. if the european stability mechanism – an institution that can provide financial assistance to euro area member states

money lenders. i am happy to report that seven out of the nine proposals made have been progressed with the other two still under discussions. the government and world bank are already in negotiations for a financing arrangement that may incorporate a form of guarantee scheme and financial education elements while dbz has been recapitalized and has disbursed some funding through other financial institutions. a legal framework for consumer protection as well as possible incentives have already been taken account of through adequate provisions in the revised banking and financial services act which is under government consideration for possible legislation in 2014. guest of honour we all agree that one of the major barriers to growth of the sme sector in zambia is the shortage of financing despite its high potential to catalyze growth and employment creation. it therefore makes business sense that the financial sector should start to look at the financing problems for smes in a holistic manner which takes into consideration other developmental constraints which may impede sustainable growth and render the financing ineffective. in line with government ’ s desire to enhance local content through smes and use of locallymanufactured inputs in the zambian mining industry, a study in the mining sector is being under taken by the zambia local content initiative ( zmlci ) facilitated by the world bank and co - financed by dfid. the goal is to build sustainable collaboration between smes and the mining industry. it is our hope that the above initiative will be extended to non - mining related smes such as those in agribusiness, tourism and retail. honourable minister you may wish to note the following topics that will be discussed during this forum : i. sme financing and business linkages, ifc experiences in africa ; ii. sme financing and experiences and lessons learned – afdb ; iii. promoting business linkages in zambia – dfid zambia ; and iv. sme financing and business linkages in zambia – focus financial services. further, the programme will include panel discussions on policy recommendations and an interactive session. the discussion panel will, among others, cover policy issues and outline some possible recommendations for action. chairperson as i conclude, allow me to thank the presenters and panelists for accepting to facilitate our deliberations at this forum. i urge all delegates to engage fully in these discussions so that we can collectively develop pragmatic solutions to the financing challenges facing zambian businesses. thank you for listening. bis central bankers ’ speeches