for which south africa is ranked an impressive 12th out of 140 countries, falls under the second stage of development. 2 this initiative, together with various other initiatives that are currently under way in our markets, will help improve the process of more efficient and safer intermediation of capital, enhance our competitiveness and contribute to the attractiveness of our markets for foreign investments. as a country that runs both budget and current account deficits, that are being predominantly financed by short term foreign capital flows, this becomes rather crucial. the sophistication and depth of our capital markets also play an important role when the country ’ s credit ratings are being assessed. contributing to south africa ’ s delivery on its g20 commitments before i conclude, let me briefly touch on how this initiative also helps south africa to meet its g20 commitments. south africa as a member of the g20 was invited to join the bank for international settlements ( bis ) committee on payment and market infrastructures ( cpmi ), and it is also a member of international organization of securities commissions ( iosco ). as a member of the bis cpmi, the sarb contributed to the development of the principles for financial market infrastructures ( pfmis ). the pfmis update, harmonise and strengthen the international risk management and associated standards applicable to systemically important payment systems ( pss ), central securities depositories ( csds ), securities settlement systems ( ssss ), central counterparties ( ccps ) and trade repositories ( trs ). these principles were published in 2012 and g20 member countries were expected to adopt them and also apply them in their jurisdictions. south africa embraced these principles and issued a position paper to drive their application by identified fmis in the payment system. once the financial sector regulation bill has been enacted, followed by other consequential legislative amendments, we will be able to fully adopt the pfmi. it is, however, also encouraging to note that with assessments of compliance on south africa as a jurisdiction by the global competitiveness report 2015 – 2016, world economic forum. bis central bankers ’ speeches the bis cpmi / iosco, we have been scored quite favourable overall when it comes to the expected outcomes. furthermore, we have requested our recognised payment fmis ( including strate ) to conduct self - assessments, which were reviewed by our national payment system department prior to engagement with the fmis on appropriate action going forward. in conclusion, let me reitera

are forced to wind down their leveraged positions. in other words, they would have to borrow less and pay back their previous debt because the thin margins from which they profit would become even thinner or negative. in doing so, they would probably have to sell the assets that they had purchased on the expectations of future price gains. in the end, the “ deleveraging ” process triggered by the policy - induced restriction would ultimately exert a dampening effect on asset price growth. 1 changes in policy rates – in combination, eventually, with appropriate central bank communication – can also serve as a signalling device from central banks and break the private sector herding behaviour that fuels the bubble. needless to say, “ leaning against the wind ” cannot be translated into an automatic rule. policy action is always the outcome of a decision that takes into account a complex situation. the monetary pillar is there to uncover the complexity of the shocks that drive monetary aggregates, and to alert us on the channels of influence through which these shocks can interact with financial trends and pose risks to price stability over the medium term. as mentioned earlier, the monetary pillar is not an automatic rule that translates money growth into a policy decision. i have already mentioned one episode in the summer of 2004, when we decided to stabilise the policy rate at 2 %, and, thereafter, in late 2005 when we started to tighten the stance of policy. at the time, the decision to tighten was based, among other elements, on the consideration that the combination of strong money and credit growth in the euro area in a context of already ample liquidity – with the excessive asset price growth being fuelled by an unsustainably low risk premium – posed risks to price and macroeconomic stability over the medium term. we decided to act on strong money growth because our monetary analysis at the time indicated that the rapid creation of money was due to a rapid expansion of the supply of liquidity by monetary financial intermediaries. that signal was very different from the signal that monetary analysis was sending in the preceding period of strong money growth – in the aftermath of the collapse of the stock market in 20012002 – when the root causes of the rapid monetary growth were different and due to an expansion of the demand for money by households who wanted to diversify their portfolios away from the stock market and toward safer instruments. as you can see, monetary t. adrian and h. s. shin. “ liquidity, monetary policy, and financial cycles