On Friday 16th April 1999, a delegation of senior officials from the Central Bank of Lesotho (CBL) led by Governor S.M. Swaray met with their counterparts at the South African Reserve Bank (SARB) under the Chairmanship of Deputy Governor C.J. de Swardt. The purpose of the meeting was to discuss a wide range of issues of mutual interest to both institutions, with particular reference to ongoing reforms of the banking sector in Lesotho; cross-border payments, clearing and settlement systems within the context of the SADC financial development framework; cooperation and collaboration on matters relating to monetary policy and currency exchange; and capacity building. The Governor of the Central Bank of Lesotho briefed his counterparts about the ongoing efforts to strengthen the country's financial system, in particular its largest commercial bank, Lesotho Bank. To this end, Lesotho Bank is in the process of concluding a management contract with Standard Bank of South Africa through its subsidiary, Standard Bank (Lesotho). In anticipation of this, Standard Bank (Lesotho) has been assisting in the management of Lesotho Bank with effect from 1st April 1999. The SARB and CBL concluded that the ongoing reforms within the banking sector in Lesotho were adequate to address the needs of the changing environment. Notwithstanding the overall progress made with the reforms thus far, the SARB and the CBL recognised the urgent need to press ahead with efforts aimed at reducing the risks associated with cheque-based cross-border transactions. There was also a need to address longer-term issues of cooperation and collaboration on matters relating to monetary and financial policies. In this regard, a number of areas were explored.1. Cross-border Payments, Clearing, and Settlement SystemsIn order to strengthen Lesotho's financial sector further and position it to cope adequately with the increasing volume and sophistication of cross-border trade between South Africa and Lesotho, the two Banks recognised the need to minimise the risk to the business communities in both countries associated with cheque-based cross-border transactions. The issue of the need to shorten the settlement period between the two countries was also discussed extensively and various avenues were explored. The SARB and the CBL recognised the need to accelerate the development of a cross-border payments, clearing and settlement model that would address the specific requirements of Lesotho and which would at the same time be consistent with that of the rest of SADC member countries. To this end, the Banks agreed to set up a working group to examine mechanisms to address these problems immediately.2. Cooperation and Collaboration on Matters relating to Monetary Policy and the Exchange of CurrencyIt was agreed that, given the high degree of integration of the economies of the two countries, resulting from the Common Customs Union and the Common Monetary Area arrangements, the SARB and the CBL should hold regular consultations on the implementation of monetary policy and on the exchange of currency.3. Capacity BuildingThe CBL briefed the Reserve Bank on its current efforts to shift towards increasing emphasis on the use of indirect instruments of monetary policy that have necessitated a review, modernisation, and strengthening of a number of areas within the Bank. These included the legal and regulatory framework; information technology systems including the Y2K readiness; and the setting up and development of the money markets. As a result of these required changes, it had become necessary to restructure the Bank. The restructuring process has created gaps in the human resource needs of the Bank. Accordingly, the SARB agreed to assist the CBL with training and capacity building, and to create a Working Group for this purpose. The two Banks agreed to meet again in the near future to review the results of the Working Group. C.L. Stals S.M. SwarayGovernor, South African Reserve Bank Governor, Central Bank of Lesotho ​