customers with a view to providing properly priced products and services. chairperson, the government has also created the citizens economic empowerment commission ( ceec ) in order to enable small businesses with viable investment projects have access to finance. i would personally like to see an increased flow of credit to our smes which, as many of you know, have been routinely found to be a major source of growth in any market economy. this is more so as the larger part of our productive population, particularly those in the informal sector, is in fact employed in one way or the other in these smes. it is therefore strategic for us in the financial advisory arena to support our brothers and sisters who run these smes. by ensuring that credit flows in that direction, we can then be assured that more and more of our people who are engaged in smes will certainly have access to financial services like everybody else. in the process, growth generated from the smes can sustainably offer the much needed respite from mineral dependency. ladies and gentlemen, for government initiatives to be effective there is need to integrate them into the mainstream financial system. in this regard, financial reforms must continue to evolve and be dynamic in order to address the main challenges still facing the zambian financial markets. whilst the government should take a leading role in creating an enabling environment and putting in place an effective regulatory framework, the financial services industry, to which you all here belong, can also make a significant contribution to the reduction in the cost of capital. i therefore wish to encourage you, through this platform, to provide accurate, reliable and high quality financial information on all business activities. the availability of firm level financial information will assist financial institutions in making informed decisions on granting capital to firms. this would in turn lead to a reduction in the level of risk premium loaded on the loan rates. ladies and gentlemen, allow me to conclude by stating that zambia is a country in urgent need of investment. however, the high cost of finance has hampered the increase in investment. therefore provision of appropriately priced financing and policy incentives to our business firms are important triggers to investment opportunities and increased productivity. the recent survey by government and its cooperating partners on the cost of doing business has highlighted the need to ignite the smes by allowing them to come out of informality and contribute to job creation and poverty reduction. although there are still many challenges remaining, i am particularly encouraged by the increasing number of financial service providers in the zambian economy. this is important for

tax treatment of these instruments – which have now been cleared up – were one of the reasons why german banks were so slow to issue such bonds. in addition, german companies legislation has thus far not explicitly provided for mandatory convertible instruments where the right to convert lies with the issuer. the 2014 draft act amending the companies act, which is currently making its way through the legislative process, will make it legal here in germany, too, to issue coco bonds, which would then convert to equity shares. banks ’ growing need for capital could be precisely the catalyst that might increase the importance of coco bomds in germany, too – which is all the more reason to be careful. attractive as these instruments may be to banks and investors, we must remember that these are very complex capital instruments, especially since they are governed by such disparate areas of the law as companies law, debt law, tax law and supervisory law. there is a risk that retail investors in particular, mesmerised by the relatively high returns on coco bonds, could lose sight of the risks involved. banks are aware of the danger : deutsche bank, for instance, issued its coco bonds in denominations of €100, 000 in order to restrict entry into coco bond business to institutional and professional investors. in the united kingdom, the sale and distribution of coco bonds to retail investors is even prohibited by law. bis central bankers ’ speeches now is the time for supervisors to develop a code of best practices for issuing coco bonds. while taking national legal systems into account, we supervisors need to strive for as much standardisation as possible in order to achieve convergence in the eu. it is important, though, that coco bonds actually be used to absorb the losses that the issuing banks could potentially incur. this challenge has been recognised by eu lawmakers and supervisors. the key tasks facing supervisors now are to observe the market very closely and to press ahead with efforts to improve the legal framework for coco bonds. once these tasks have been accomplished, coco bonds can be a useful addition to banks ’ capital structure. by helping to strengthen the capital base, they will make an added contribution to enhancing banks ’ resilience to future crises. bis central bankers ’ speeches