community, banks with cross border operations continue to report operational challenges. the major operational challenge is the need for a huge capital outlay, which could otherwise be minimised through centralisation of some operations and decision making. with the advancements in information technology, centralisation of some operational processes is being embraced globally based on the resultant cost savings as along as adequate risk mitigating measures are assured. in this regard, i urge regulators in the eastern africa region to always embrace a developmental mindset as they consider proposals by market players. as long as adequate risk mitigation measures are demonstrated, innovations should be facilitated. it is only through this that our banking sectors will effectively play their roles of resource mobilisation, allocation and deepen the market. more importantly, innovations will reduce the cost of banking services and products. lower costs are critical to tapping the vast unbanked populace in our region. ladies and gentlemen : the output from this meeting will provide a framework to enhance effective supervision of the kcb group. it will also set precedence for the supervision of other banking groups with cross border operations. i acknowledge the presence of kcb management who i am informed will showcase their strategy and operational plans. it is through a clear understanding of institutional strategies and plans that supervisors are able to proactively discharge their supervisory mandates. ladies and gentlemen : i believe that there is a great wealth of supervisory information and ideas to be shared in this supervisory college. as the east african central banks, there is need to be steadfast in supervision of institutions with cross border operations to minimise the likelihood of systemic effects in case of failure. i therefore wish to reiterate the importance of seizing this opportunity to discuss mechanisms of enhancing regional coordination in supervision as well as crisis management / mitigation. with these few remarks ladies and gentlemen, it is now my honour and pleasure to declare this inaugural supervisory college meeting officially opened and i wish you fruitful deliberations. thank you bis central bankers ’ speeches

forming a currency union, with australia or anybody else, would avoid the problem of strong currency appreciation in the future. as i have already indicated, most of the world ’ s largest economies have within the last decade seen appreciations of a size similar to that experienced by new zealand in the mid - nineties. the hong kong dollar, effectively tied to the united states dollar since the early eighties, saw a huge real appreciation during the nineties in part as a result. australia did not have such a strong – 13 – appreciation during the nineties but, as also indicated, the australian dollar has had rather more volatility over the last 20 years than the new zealand dollar has. it is not very long ago that the most common complaint made to me in areas of the country outside auckland related to the fact that non - aucklanders were facing real interest and exchange rates which were quite inappropriate to the inflationary pressures in areas outside auckland. why, i was often asked, do we have to pay these high real interest rates, and suffer the penalties of the high real exchange rate, when the only inflationary problem is in auckland? of course, inflationary pressures were far more widespread than this question implied, but my answer always included the point that, in a single currency area ( new zealand ), there can only be one set of interest rates and one exchange rate. sometimes those monetary conditions will be too loose for some parts of the country and too tight for other parts of the country. but that is the nature of the beast : it simply isn ’ t feasible to have a different set of monetary conditions in different parts of the same currency area. this means that if we were part of a currency union with australia and the australian economy were very buoyant, perhaps because of booming exports of iron ore, gold, and wheat, it is quite possible that new zealand exporters would be facing a rising ( common ) exchange rate and all of us would be facing relatively high real interest rates at a time when the new zealand economy was quite subdued. new zealand exporters who were concerned about an exchange rate dominated by auckland conditions can hardly feel confident that sydney or melbourne economic conditions will always be more relevant to them. but surely, if it makes sense for 11 european countries to form the economic and monetary union, with a common currency throughout those 11 countries, it must make sense for new zealand to link with australia ( or somebody else ) also? not necessarily. although 23 per cent of our total