During the period under review, the banking system continued on a good growth trajectory while displaying increased signs of resilience.  In the context of low growth rates experienced by the global and domestic economies, the South African total banking-sector assets increased by 6,9% for the year ended December 2012.  Gross loans and advances (on average, 74% of banking-sector assets) increased by 9,2% to R2 753 billion the year ended of December 2012.    The resilience of the South African banking system is displayed by the healthy levels of capitalisation and strong levels of liquidity.  The average capital adequacy ratio of the South African banking system remained above the minimum requirement (9,5%) at 15,9%.  Of this ratio, tier 1 capital adequacy ratio was at 12,6%.  The average liquid assets held by the banking sector expressed as a percentage of required liquid assets was 198,7% as at December 2012, up from 193,5% in December 2011. In addition to the improving levels of capital and liquidity, credit risk as the biggest risk area in the banking system, has been declining and remained well managed.  Total impaired advances declined 5,1 %from R118,1 billion as at December 2011 to R112,1 billion as at December 2012.   The 2012 Bank Supervision annual report covers banking activity during the transition from the Basel II to the Basel III framework, which became effective on January 2013.  South Africa is amongst the first ten regulatory authorities to have implemented Basel III on schedule.  Basel III is a postulation of the post crises revision of capital and liquidity standards, with the aim of improving regulation in response to the recent financial crisis.  Unsecured lending, the African strategies of South African banks, as well as the recovery and resolution planning were identified as the “flavour-of-the year” topics by the South African Reserve Bank (SARB) for 2012.  Within the banking system, the rates of growth in unsecured lending began to slow down.  Total unsecured credit exposures increased by about 24% from R364 billion in March 2012, to R453 billion in March 2013 (this figure includes, revolving credit facilities, SMEs and overdrafts).  Measured against the total banking assets of R3,6 trillion, banks’ exposure to unsecured loans does not pose a systemic risk to the stability of the banking system.  South African banks showed appetite for growth in Africa.  A common theme amongst the big four banks’ strategies has been expansion to selected African countries either by way of acquisition or by the establishment of new banking operations.  Such planned growth presents a set of opportunities and challenges from a supervision and regulation point of view. Cross-border supervision and consolidated supervision would have to be strengthened with the relevant host authorities.   The Bank Supervision Department continues to investigate illegal deposit-taking schemes.  As at December 2012, there were 38 schemes under review.  The total number of schemes finalized in 2011 is 14 while in 2010 25 schemes were finalized.    The Bank Supervision Department will continue on its on-going focus on its mission to promote the soundness of the banking system and contribute to financial stability.  The department is mindful of the evolving regulatory and supervisory landscape in the areas of Basel III and further related developments; financial stability and/or resolution planning; and the twin peaks regulatory framework.  The Department’s core operational focus remains the prudent and effective day-to-day supervision of the banking system.   EnquiriesHlengani MathebulaHead: Group Strategy and Communications