SOUTH AFRICAN RESERVE BANKBANK SUPERVISION DEPARTMENTANNUAL REPORT1998 Issued by Authority MISSION TO PROMOTE THE SOUNDNESS OF BANKS THROUGH THE EFFECTIVE APPLICATION OF INTERNATIONAL REGULATORY AND SUPERVISORY STANDARDS PHILOSOPHYMarket principles underlie all activities and decisions, and we strive to project an image of professionalism, integrity, credibility and impartiality at all times. We subscribe to a service-oriented approach, which entails accessibility and integrity, and a high premium is placed on ethical behaviour at all levels of activity. A relationship of mutual trust between this Department and all other key players is regarded as essential and is built up through regular open communication. PRINCIPLES TO STRENGTHEN BANKING SYSTEMSBecause of the risk of problems in one area of the financial sector spilling over to other areas, particularly to banks, and even to banks in other countries, there is a worldwide need to strengthen banking systems. It may therefore be useful to reiterate some guiding principles in this regard: " ... there is broad agreement on the principles that must guide policymakers as they seek to strengthen their own banking systems and contribute to the stability of the international financial system: (1) the soundness of a bank is first and foremost the responsibility of its owners and managers; yet the soundness of a banking system is a public policy concern; (2) bank soundness is crucially linked to sound macroeconomic policies; (3) a framework for sound banking must include structures to support internal governance and market principles, as well as official regulation and supervision; and (4) international cooperation and coordination can play an important role not only in strengthening the global financial system but also in improving the soundness of national banking systems." Michel Camdessus, Managing Director, International Monetary Fund. In: Lindgren, Carl-Johan, et al: Bank soundness and macroeconomic policy. Washington, DC: International Monetary Fund, 1996, p. v. BANK SUPERVISION DEPARTMENT Annual report for the calendar year ended 31 December 1998 in terms of section 10 of the Banks Act, 1990, and section 8 of the Mutual Banks Act, 1993. The purpose of this report is to present an overview of the objectives and activities of the Bank Supervision Department of the South African Reserve Bank, with particular reference to the period 1 January 1998 to 31 December 1998.