cycle and banks often face incentives to offer credit more generously in booms and less generously in busts. regulators do not want their rules to magnify the cyclicality of bank lending, and hence the extent of economic cycles and any associated strains on the financial system. however, some aspects of the new basel ii capital framework have the potential to provide banks with additional incentives if not monitored closely. 10 under basel ii, it is possible that overly optimistic assessments of risk at a good point in the economic cycle might feed through to the capital banks hold and encourage further pro - cyclical lending. for example, if banks were to underestimate the long - run risk of borrowers defaulting or overestimate the realisable value of collateral ( e. g., a mortgage over a house ) and that fed through to their capital requirement they might be encouraged to lend more. when implementing basel ii capital requirements in coming months, we will be working to ensure that the average level of capital a bank is required to hold for regulatory purposes is sufficient for all stages of the business cycle and any changes do not accentuate the lending cycle. on a different topic but still with banks, we are also looking at the role securitisation plays in the new zealand financial system as part of our basel ii activity. in simple terms, securitisation is the parcelling up of a stock of assets ( such as bank mortgages ) and the on - selling of such parcels to interested investors. basel ii is a new set of bank capital adequacy requirements being implemented in many developed countries. for more details see : yeh, a, j twaddle and m frith ( 2005 ), “ basel ii : a new capital framework ”, reserve bank of new zealand bulletin, 68 ( 3 ), 4 – 15. given the dominance of banks in new zealand, and the concentration of their activity in mortgage lending, the securitisation of some of their mortgage books has the potential to reduce the concentration of mortgage loans on banks ’ balance sheets and to distribute the credit risk associated with those loans more widely. in addition to spreading risk more widely, securitisation gives investors another product in which to invest their funds and provides banks with another way of sourcing funding and reducing maturity mismatches on their balance sheets arising from a preponderance of short - term funding and longer - term lending ( e. g. fixed rate mortgages ). it

emmanuel tumusiime - mutebile : the uganda securities exchange ’ s efforts in deepening and broadening capital markets speech by prof emmanuel tumusiime - mutebile, governor of the bank of uganda, at the nation media group shares cross - listing luncheon, kampala, 19 october 2010. * * * the chairman, nation media group, mr. wilfred kiboro the chairman, capital markets authority, uganda, mr. haji twaha kawasse the ceo, uganda securities exchange, mr. joseph kitamirike the ceo, nation media group, mr. linus gitahi directors and staff of nation media group, shareholders, investors, distinguished guests, ladies & gentlemen i am pleased to have been invited to attend and make key remarks at this luncheon commemorating today ’ s cross listing of east africa ’ s premier media house, the nation media group. i want to commend and appreciate nation media group for the gesture. the building block of the success of the uganda securities exchange that we witness today is largely attributed to government and we must applaud its efforts in creating an environment in which the economy can thrive. together with the government, the role of the bank of uganda in particular consists of providing a supporting environment for rigorous economic activity through sound and coherent macroeconomic policies. the central bank ’ s efforts towards supporting macroeconomic environment have centered on preserving price stability. ensuring a reasonably low level of inflation helps reduce uncertainty in economic decisionmaking so that individuals and investors have a reliable basis for long - range decisions and plans. the bank ’ s efforts to keep inflation in check have so far been successful. a continuing commitment to prudent macroeconomic policies builds confidence in uganda as an investment destination and boosts the country as a whole. the use has played it role in providing an efficient, well regulated exchange that has made the investment process as simple, affordable and transparent as possible. however, the underlying investment decision is dependent upon perceptions of the future performance of uganda as a whole. in conclusion, i wish to highlight some critical factors that will govern the progress of the use going forward. firstly, will be the steadfast commitment to taking a regional and global view for purposes of deepening and broadening our capital markets. secondly, our regulatory and enforcement structures should be responsive to today ’ s market place. in conclusion, i want to congratulate the nation media group ’ s board of directors, the management and staff for this monumental achievement