which had potential financial stability implications. these risks included the announcement of an investigation into accounting irregularities at steinhoff international holdings in december 2017, followed by the resignation of their chief executive officer and chairman. the group ’ s share price subsequently declined by more than 80 %, which resulted in a short - term liquidity crisis within the group. to date, the group has taken various actions in an effort to stabilise its finances and operations in the medium term. any potential financial implications arising from this event would most likely be the result of some form of default risk in respect to the group and related parties ’ debt obligations that the financial sector may be exposed to. while such a default could cause losses for banks, lenders and investors, it is unlikely to result in financial instability as most of the exposure to the group and related parties ’ lies with foreign banks. developments relating to this situation are, nevertheless, closely monitored. furthermore, since december 2017 we have observed an increase in the volatility of selected equities listed on the jse limited. the sharp, though brief, decline in the share price of capitec bank ( capitec ) was likely been triggered by a ‘ short - selling ’ strategy applied by certain investors. the common traits of such a ‘ short - selling ’ strategy include influencing market participants ’ perceptions by means of extensive use of social media platforms and potentially, running an ongoing campaign against the targeted entity. page 2 of 5 this type of ‘ short - selling ’ strategy has the potential to create financial instability, especially if the targeted company is a deposit - taking institution. although a decline in a bank ’ s share price does not necessarily create systemic risk, there may be a risk to financial stability. this could transpire if the information being spread by the ‘ short - selling ’ campaign, whether it be true or not, results in a negative feedback loop between lower investor confidence, as reflected in a decline in the equity price of the targeted institution and a loss of depositors ’ and lenders ’ confidence in the targeted deposit - taking institution. this may ultimately result in a decline in deposits or a ‘ run ’ on the bank. the negative feedback loop can exacerbate the circumstances even if the trigger event was based on inaccurate information. in the capitec case, statements by the sarb and appropriate responses by capitec calmed fears and led to a recovery in capitec ’ s share price. vbs mutual bank ( vbs ) was

the new and increased opportunities for financial crime, particularly in a crossborder sense. 13. in particular, the externally orientated economy of hong kong means that geopolitical events, and the increasing complex global sanctions as a response to those events, continue to challenge the sanctions screening and compliance programmes of banks. the hkma has identified sanctions compliance – in particular the risks emanating from dprk – as a core supervisory priority in the year ahead, and i am glad that there is an opportunity for my colleague to share some of our work in this area in one of the panel discussions later today. 14. now to be clear : the developments i mentioned have actually driven changes for good. and i can say without hesitation that financial institutions are undoubtedly more capable of 2 / 4 bis central bankers'speeches combatting ml / tf risks than they were 10 or 15 years ago. let me illustrate. over the past few years all of our banks have put in place an assessment of ml / tf risk across the institution which informs the design of aml / cft controls – this helps to ensure resources are targeted towards areas of higher risk. the banking sector also continues to pull its weight in reporting suspicious transactions - last year we saw a 25 % increase from 2016 in terms of strs. this is a reflection of the increased ability of upgraded monitoring systems to detect suspicious transactions on the one hand, and the willingness of banks to report suspicion where they see it as well as to take robust actions to mitigate the risk on the other hand. but these same developments have also resulted in “ casualties ” – a clear example of which is the “ de - risking ” phenomenon – and this has led to financial inclusion being one of the priorities for the current fatf presidency. this is also something that we in hong kong are very committed to addressing. 15. the reality is that we often see institutions implementing more capable aml systems, and in that process collecting a lot more information on customers or including more scenarios in transaction monitoring. this is all good, but this may not always translate into greater effectiveness, and too often there is not a sufficient focus on answering the questions of : “ does it deliver the right results or outcomes? ” and “ is the system more effective in detecting and preventing criminals from abusing the institution? ” 16. so i would highlight in particular three issues as having the potential to significantly change how effective we are in this work and which are being discussed at this event.