grouping that is now in the making is the so - called willard group, called together earlier last year by the american secretary of the treasury and the chairman of the board of governors of the federal reserve system, for a special discussion on the world financial crisis. the group originally included 22 countries, being the major industrial countries and leading emerging market countries, including south africa. at a meeting in washington on 5 october 1998, three more countries from europe were also invited to participate. this group, working through sub - committees in which south africa also participates, produced three interesting documents with proposals for improving the international financial system in respect of : • transparency and accountability ; • strengthening of financial systems ( regulation and supervision ), and • managing international financial crises. the nature of the current debate last year ’ s annual meetings took place against the background of : • the east asian crisis and its contagion effect, first on other emerging markets, and later on the world economy ; • the serious eco - political situation in russia ; • the collapse of a major hedge fund in new york – long term capital management ; – 3 – • the growing threat of a collapse of the brazilian economy ; and • growing concern about a slow - down in world economic growth. at the washington meetings, these economic problems were dissected from all angles ; the causes of the problems were linked to : bad macroeconomic management ; ineffective financial regulation and supervision ; the current non - system of international exchange rates ; excessive gearing within financial institutions ; etc. steps taken by countries and by the multinational institutions to manage the problem and to find solutions were criticised, sometimes for good reason, but often also on the basis of illusory perceptions. the search for measures to prevent the recurrence of a similar situation in future started in all earnest. it is not possible to summarise all the discussions in this short presentation of today. i am therefore taking a cue from summaries published by the imf itself ( after the meetings ) of some consensus reached in the discussions ( from imf survey of 19 october 1998 ). apart from stressing the need for sound macroeconomic policies at the national level, a programme was agreed to for further studies on the strengthening of the international financial system ( the “ architecture ” ). these further studies would be undertaken within the executive board of the fund and would cover : • a possibility of strengthening or transforming the interim committee ; • a code of conduct for fiscal policy, as well as the ongoing work

, for example, has argued that because housing markets are at the epicentre of most financial crises, it is sufficient to focus on instruments that prevent excessive build - up of housing related credit. these include setting maximum loan - to - value ratios on property transactions and borrowing restrictions in relation to disposable income. other possible macroprudential instruments include reserve requirements for particular types of loans, contracyclical capital buffers for banks and capital surcharges for systemically important banks. in general these are microprudential tools, some of which had previously been applied in many countries as anti - inflation measures and since jettisoned, but are now being reconsidered with a narrower focus. it is still premature to pronounce on the efficacy or success of such policies, and this remains work in progress. in reality financial stability is generally a shared responsibility as financial crisis resolution often requires fiscal intervention and the application of public money. this has the potential to create challenges for central bank independence. even if narrow monetary policy independence remains intact, the boundaries between monetary and macroprudential policies are often blurred. however, as jaime caruana of the bis argued in his address at the bank last year, because there will always be strong opposition to central banks resisting asset price accelerations, or taking away the punchbowl when the party gets going, the arguments for independence apply with even greater force, and such independence will be needed not only from political cycles but also from the financial markets. bis central bankers ’ speeches in south africa, the implicit financial stability mandate of the bank was made explicit in the letter from the minister of finance to the governor in february 2010. the bank ’ s financial stability committee has been reconstituted and meets in alternate months to the mpc. furthermore, and in recognition of the shared responsibility for financial stability, a financial stability oversight committee has been established, jointly chaired by the governor and the minister of finance. the focus of the bank fsc is on crisis prevention, and while the fsoc does review current conditions, the primary purpose of this committee is crisis management and resolution. furthermore, government has decided that regulation and supervision of the financial sector should move to a “ twin peaks ” approach. this means that all prudential regulation will become the responsibility of the sarb, while market conduct will be the province of the financial services board. this is a very significant reform and adds to the tasks and responsibilities of the bank.