do arise in the financial system, the bank may have to carefully contain them directly as “ lender of last resort ”. the lender - of - last - resort facility will not, however, automatically be made available to all banks in distress, but only in cases where the failure of a bank would pose a serious threat to the financial system as a whole. criteria will be established to specify the exit strategy of the reserve bank. a deposit - insurance scheme is being developed to cover retail depositors. this scheme could provide more latitude in deciding whether to close an ailing bank, without the concern that depositors in financially healthy banks may lose confidence in the banking system as a whole. sound financial supervision is a prerequisite for financial stability and warranted the debate during the past year on the feasibility of establishing a single financial regulatory authority in south africa. most countries have securities commissions responsible for the regulation of investment services and in many countries there is still a separation of banking and insurance supervision. current opinion in south africa is influenced strongly by recent developments in the united kingdom and australia where banking supervision has been moved out of the central bank into a single financial regulator. there are convincing arguments both for and against a single financial regulator. arguments for such a single regulator include issues such as the blurring of functional dividing lines between different institutions, the development of financial conglomerates, the exploitation of gaps in financial regulation and the achievement of economies of scale and a uniform style of regulation. arguments for the retention of bank supervision as a reserve bank function are based on the characteristics of banking, the special relationships between the bank and the banking sector, the high systemic risks in banking, the importance of a healthy banking system for effective monetary policy and the bank ’ s ability to compete for scarce human resources. it is important that all these arguments be carefully considered by government to find an appropriate approach to this issue that can continue to assist in the execution of monetary policy. a well - organised decision - making process is another important factor in the conduct of monetary policy. all monetary policy decisions are currently made by the governors ’ committee ( consisting of the governor and deputy governors ), while the monetary policy implementation committee ( mpic ) is responsible for carrying out monetary policy. although this decision - making process works well, monetary policy issues demand more attention. it has therefore been decided to create a monetary policy committee ( mpc ) for the formulation of monetary policy. the mpc will consist of the governor and deputy governors as voting members

ilmars rimsevics : the latvian strategy for the euro transition opening remarks by mr ilmars rimsevics, governor of the bank of latvia, at the conference “ banking and finance in the baltics 2004 ”, riga, 25 october 2004. * * * ladies and gentlemen! it is my pleasure indeed to be here today and to address this distinguished audience, to make use of this opportunity of sharing views regarding latvia ’ s emu accession! for a number of years latvia has worked hard to become a nato member, to become an eu member. we have successfully put these challenges behind us. the question now is - what lies ahead? to my mind the most exciting exercise and challenge faced by the latvian central bank, our government and our society in general is the emu accession project. this project has been outlined relatively recently and is being implemented as we speak. it is no less demanding, i guess, than achieving nato and eu membership. quite a lot has been said already about the budget deficit and overheating of the latvian economy and i think that the message of the central bank has been heard. therefore i would like to concentrate more specifically this morning on how we see the road ahead of us. as you know, in accordance with the eu legislation stipulates that, by joining the eu, we commit ourselves to introducing the euro as legal tender in latvia sooner or later. latvia undertook to observe this legislation with a convincing majority of votes in the 2003 referendum. hence the question is not whether the euro will be introduced in latvia, the question is when it will happen. for this process to be as successful as possible, it should be guided by three basic principles. it should : • be easy to understand and transparent - i. e. any person living in latvia, without doing any complicated calculations, must be able to follow how the exchange rate between the lats and the euro is set and quickly make sure whether the existing rate has been set correctly ; • provide for equal treatment of all individuals and group interests of enterprises - i. e. no social group should gain advantages at the expense of other groups as a result of the change of the peg ; • provide for stability - i. e. it must not give rise to speculation and weaken the macroeconomic stability in the country. the euro is becoming the most frequently used currency in the latvian foreign trade transaction ( fig. 2 * ). the majority of latvian entrepreneurs also want stronger ties between the latvian currency