The South African Reserve Bank (SARB) today released the March 2005 edition of the Financial Stability Review, published in the interest of promoting and maintaining a stable financial system. This publication is central to the SARB’s transparent approach to enhancing the understanding of financial stability and encouraging debate on financial stability issues. According to the Financial Stability Review the resilience of the global financial system improved further during the second half of 2004, mainly as a result of the continued global economic recovery. Estimates suggest overall world growth to be the strongest since 1998. Although the Financial Stability Review provides a positive assessment of global financial stability, it also identifies developments that could impact stability. These are growing levels of global imbalances, high oil prices, the ever-present threat of terrorism and political tensions, a destabilising reversal of investment flows into emerging markets and the impact of under-funding and ageing populations on pension funds. The South African financial system was assessed as sound based on an analysis of various indicators. Increased confidence in the financial system was evidenced by a rise in the financial services index, while stress testing results showed that the South African banking sector would remain resilient to specific plausible macroeconomic shocks. While rising business confidence and lower insolvencies were positive developments, high levels of growth in house prices (which peaked in September 2004) and growing household debt still need to be monitored closely. An appraisal of the South African regulatory environment has shown that South Africa generally complies with international standards and best practice. The continuous commitment to establishing a stronger and more stable financial system environment makes South Africa less vulnerable to financial crises and the effects of contagion. Further enquiries:Andre Bezuidenhout, Head Financial Stability Department(012)313-3401 Please note: hard copies of the publication will be available at the Johannesburg Branch and at the Head Office reception.