francois groepe : improving the security and cost - effectiveness of banknotes address by mr francois groepe, deputy governor of the south african reserve bank, at the 18th conference of the association of african banknotes and security documents printers ( aabsdp ), hosted by the south african bank note company ( sabn ), cape town, 17 november 2014. * * * good day ladies, gentlemen and fellow central bankers, a warm welcome to south africa, welcome to the mother city and the 18th conference of the association of african banknotes and security documents printers ( aabsdp ). cape town is one of the most beautiful and well - known cities in the world – it is rich in history, art, culture, nature and i sincerely hope that you will enjoy your stay. its fame, and that of south africa, has been lifted by the extraordinary courage and dignity of one man, nelson mandela, and i am proud that our new currency pays homage to this great man. i have been informed that we have more than 300 delegates attending the conference, representing 80 organisations around the world, of which more than 25 central banks are represented and various government institutions, such as printing works and mints. from the outset we have aimed to invite a broad spectrum of people as possible and i am delighted that we have succeeded in this endeavour. the theme of this conference this year is top of mind in the security printing industry today, as well as for central banks – that of improving security and cost effectiveness of banknote production and circulation which, if done successfully will contribute to efficiencies in the cash management cycle. following the great recession, most central banks had either their mandate expanded or their mandate was more explicitly defined to include financial stability. the supply and availability of cash is a critical component of financial stability because a shortage of physical cash can lead to socio - political instability which may result in spill - over effects. hence, it is important that central banks approach and treat cash management with the same diligence as they treat their monetary and financial stability mandates, as it does not stand separate from those mandates, but in fact is a key component of those mandates. central banks are continuously confronted with new developments in the design, production, circulation and destruction of banknotes. the participation of various and new stakeholders in the banknote lifecycle, trends in substrate choice, features and banknote life expectancy, heightened demands for improved productivity and efficiency and emerging threats from counterfeiters all add to

japan. harnessing the very latest ict - - the printing press, the newspapers - - people in the dutch cities of the golden age were able to find the opportunities of financial innovations. iii. market failures and the role of financial regulation and supervision financial innovations also held dangers. now, let me turn to the risk of financial innovations. historically, the wider access to capital through markets also became important sources of economic volatility. in 1776, adam smith warned that company managers exempt from being liable for company losses were the managers of " other people's money ". he believed that these managers could not apply the " anxious vigilance " that partners with unlimited liabilities would apply. he concluded that, " negligence and profusion, therefore, must always prevail ". his warning was proven to be significant. today, the principal - agent problem he raised stands as one of the key market failures that justify public interventions for private companies. problems of limited liability are especially significant for financials since asymmetric information is more likely to exacerbate the magnitude of the problems. for example, under limited liability, investment managers would benefit from bubble blowing, but not necessarily suffer a symmetrical loss when it bursts. some economists show that a combination of limited liability and asymmetric information among market participants can incentivize the investment managers to blow the bubble. 5 although the evolution in ict has for example, see franklin allen and gary gorton, " churning bubbles, " review of economic studies vol. 60, no. 4 ( 1993 ) : 813 - 836 ; and franklin allen and douglas gale, " bubbles and crises, " economic journal vol. 110, no. 460 ( 2000 ) : 236 - 255. contributed to developments in modern financial risk management technologies, such developments, even combined with enhanced disclosure, have not eradicated the problems. next year 2020 will mark the three - hundredth year of the bursts of the first internationally - correlated financial bubbles. in 1720, the burst of the south sea bubble in london, the bubble which inspired adam smith, was accompanied by a similar crash in paris, known as the mississippi bubble. in the aftermath, people lost their trust in capital markets and the creation and trading of joint stock companies were sharply curtailed for a century. stagnation of capital markets left large investment projects predominantly financed by a small group of rich people. 6 financial bubbles tend to associate with financial crises when accompanied by excessive credit creation. economists who look