The South African Reserve Bank has released the first edition of the Financial Stability Review, which reviews the stability of South Africa’s financial system as part of the central bank’s broader mandate to maintain price stability and a transparent and understandable financial system.
Announcing the release of the review on Monday, the SARB said the publication was central to its transparent approach to enhancing the understanding of financial stability and encouraging debate on financial stability issues.
“Financial system stability is also regarded as an important precondition for sustainable economic growth and employment creation. Unsafe financial institutions and markets interfere with production, consumption and investment, and therefore defeat national goals of all-round economic growth and development.”
According to the review, the South African financial system is well regulated and robust and in the current macro-economic environment it would be likely to be able to withstand considerable shocks should they occur. In addition, South Africa’s financial safety-net system has been rigorously tested and assessed and has been found to adhere to international best practice.
“Globally, the prospects of an economic recovery improved during the second half of 2003, but some areas of concern remain,” the SARB said. “These include the risk of terror events disrupting global financial systems, the rising US budget deficit, the deteriorating ability of UK households to service their debt and destabilising capital flows in emerging-market economies.
“However, it appears that the risk of contagion between emerging-market economies has reduced significantly. Political instability, HIV/Aids and poor infrastructure are the main concerns in the Southern African region. Contagion from some of South Africa’s neighbours due to political uncertainty provides little cause for concern, as exposure of South African financial institutions is relatively small.”
The Financial Stability Review was produced by the Financial Stability Department, which was established in 2001 as part of the SARB’s increased focus on financial system stability. The Financial Stability Department identifies, analyses and researches potential threats to and weaknesses in the financial system, makes policy proposals and encourages regulatory and structural changes to promote the safety and effectiveness of the financial system. – I-Net Bridge