an address by francois groepe, deputy governor of the south african reserve bank, at the actuarial society banking seminar the maslow hotel, sandton 2 august 2017 bank - wide stress testing as a risk management tool members of the actuarial society, ladies and gentlemen. thank you for the invitation to address you at this third actuarial society banking seminar. the south african reserve bank ( sarb ) would like to congratulate the actuarial society of south africa on its efforts to build expertise in banking – and on becoming a world leader in this regard. your initiative to introduce a banking fellowship coupled with allowing actuaries to qualify as banking actuaries is commendable and could make important contributions to improving the resilience and stability of the domestic banking sector. my address today will focus on stress testing and how it is being applied as a risk management tool. i would also like to share the progress the sarb has made and the methodologies it has applied in its approach to stress testing the south african banking sector. stress testing forms part of the macroprudential monitoring framework applied by the sarb in fulfilling its now - expanded mandate of protecting and enhancing financial stability, in addition to its price stability mandate. as you are all aware, the mandate of the sarb, specifically its primary objective and independence, as entrenched in the constitution, has come into sharp focus recently. the primary objective of the sarb is stated in the constitution : “ protect the value of the currency in the interest of balanced and sustainable economic growth. ” this objective and the independence page 1 of 9 provided to the sarb in the constitution can only be changed by a two - thirds majority of the members of parliament ; thereafter any such change would need to be ratified by the constitutional court. in this way, the courts protect the sarb against any unlawful encroachment of its independence. furthermore, the notion of a central bank as a public institution, with the goal of promoting monetary and financial stability in the interest of the general public, is remote from the traditional concept of a commercial company with a profit motive. central banks have been structured by their respective governments to suit publicinterest ends. the shareholding structures have been retained in some cases, including by the sarb and in various others, such as the central banks of belgium and switzerland. but the inconsistencies with the shareholding of private companies necessitated a realignment of the rights and powers of shareholders

towards the goals of sustained higher economic growth and the creation of employment opportunities. the primary role of monetary policy is to keep inflation in check, which is an essential ingredient in the recipe for sustainable economic growth. there is some reason for optimism about the prospects of economic growth. as we noted in our quarterly bulletin of june 2001 the economy has been in recovery mode since the third quarter of 1999 and yet it has not exhibited some of the imbalances typical of previous expansionary periods. inflation is on a declining trend and unit labour costs are contributing to this. the household sector is in a financially healthier position and individual bankruptcies have fallen by 62 % from april 2000 to april 2001. bank balance sheets are sound. and the deficit on the current account of the balance of payments has turned into a surplus driven by the expansion in export earnings. i am convinced that the southern african - german chamber of commerce and industry can likewise make a contribution. by fostering trade and business ties between southern africa and germany, and specifically targeting small and medium enterprises, which must be the job creators in this economy, you are contributing to putting this country and region onto a higher growth path. africa is now part of the global economy, which brings its own pressures. often these pressures are ones that we have no control over. we have a much more open economy, some trade barriers have come down and we are no longer politically isolated. with the transition to a democratic south africa, confidence has begun to return with the mounting evidence that economic policies are prudent and transparent. it is on these foundations that we will continue to build upon. we count on you as our valued partners. danke. rea leboga.