. the first challenge is engaging with the banks. in the early years of resolution, banks didn ’ t seem to take the new regime very seriously. however, in recent years the resolution perspective has become more integrated in the hearts and minds of banks. we see that resolvability has increasingly become a standard consideration in strategic decisions. institutions need to accept that resolvability has a cost. and that the resolution authority can set requirements, which may impact their financial and organisational structure. requirements for lossabsorbing capacity, operationalisation of resolution tools, contributions to financing arrangements : all these measures can be quite costly, but they are – as we all know – necessary to ensure effective resolution. and this is a message that banks increasingly agree to, but not without continuous efforts. the second challenge is cooperation. it is important that all our colleagues, whether they are in supervision, at the central bank, or at our ministry of finance, work closely with resolution. they also have to take resolution into account in their decisions – just like banks are learning to do. however, interests and objectives may not always converge. the going - concern and gone - concern perspectives do not necessarily find common ground. so discussions between supervision and resolution can become heated. nonetheless, these discussions also offer opportunities. having an integrated prudential view of a bank can help anticipate crisis scenarios. it also enables more effective coordination in the phases leading up to resolution. at dnb we see a lot of these synergies, given the various combinations of tasks that fall within our mandate. i haven ’ t mentioned this yet, but besides being a resolution authority and a central bank, we also act as the supervisory authority, deposit guarantee authority, and macro prudential authority. all under one roof. what ’ s more, we have the deposit guarantee function and resolution function in the same directorate. this offers another valuable advantage, as it provides an integral view on resolvability. we will also discuss this cooperation in the fourth part of the seminar. fout! onbekende naam voor documenteigenschap. i have already taken a lot of your time in sharing our experiences, so let me wrap up and add one final thought. five words that pretty much sum up resolution : be prepared to be flexible. the essence of our job and this seminar is to be prepared for the worst. being prepared is key for making sure resolution regimes work effectively in practice. but since we

two - day meeting has been concluded and the committee releases a statement fleshing out the developments in the international and domestic economy and the reasons for its monetary policy stance relating to these prevalent developments. the reserve bank has also convened monetary policy forums, which as the name suggests, provide a forum for open discussions on monetary policy and general economic developments. the mpfs are held twice a year in the major centres of the country and engage with labour, business, community and other organisations. the forums also ensure that the views of interested parties are taken into account when determining monetary policy. this endeavour is an earnest attempt on our part to communicate monetary policy and economic issues with the broadest spectrum of people. unfortunately, to date, these forums are not that well attended, particularly on the part of the trade union movement. the reserve bank also publishes a monetary policy review twice a year to increase the understanding of its conduct of monetary policy. the first review was published on 19 march 2001 and it described the monetary policy framework in more detail. it also analysed local and international economic developments and the inflationary trends arising from these. the reserve bank also publishes its inflation forecasts in the form of a fan chart. the fan chart is used by many central banks to illustrate their inflation forecasts. so - called confidence bands are used to signify varying degrees of certainty for each broadly expected level of inflation. last but not least, the reserve bank regularly reports to parliament on the stance of monetary policy. this is in line with international practice and this is part of our accountability to the citizens of south africa. 6. what is the monetary policy transmission mechanism? in an inflation targeting monetary policy framework, policy initiatives have to be forward looking. this means that during periods of rising inflationary pressure, the monetary policy committee will have to timeously raise the domestic level of interest rates in order to achieve its objective of maintaining price stability and ensuring that the inflation target is met. studies suggest a fairly long time lag of between 12 to 24 months for monetary policy to have its main effect on inflation. the monetary policy transmission mechanism describes the sequence of events that are set in motion once interest rates are changed in order to lower inflation. changes in interest rates affect the economy through various channels. these channels include : interest rate channel : an increase in the repo rate influences other financial market interest rates. firms and individuals respond to this change by lowering their expenditure patterns. this lower level of demand affects output and will eventually feed through to