1.INTRODUCTIONFinancial markets around the world are being integrated into a single global market and, whether we like it or not, emerging and developing countries are being drawn into this process. The growing economic interdependence of countries worldwide can be seen in the greater volume and variety of cross-border transactions and in the faster and more widespread diffusion of technology. Technological progress has improved transportation and communications, enhanced information awareness and information processing, and set the stage for new products and innovations. Although these markets still do not form a single global village, they are already so interdependent that they have altered the environment in which the provision of financial services takes place. One of the most important results of globalisation has been the huge upsurge in cross-border financial transactions. This, in turn, has meant that shocks in one "national" market are quickly transmitted to other "national" markets with the speed never thought of decades ago. The contagion effect of the recent crisis in East Asia is a good example.Another consequence of globalisation, is increased competition. Financial liberalisation, the removal of controls and the breakdown of international barriers, make it possible for new entrants to participate in markets which were previously closed to them. In view of the size of these enterprises and their involvement in many countries in the world, they are usually well-placed to provide specialised services to clients at relatively low costs. The increased competition makes new demands on old established enterprises and they must either adapt or die. 2.    GLOBALISATION AND FINANCIAL INSTITUTIONSFinancial institutions all over the world have responded to these changes in different ways. Some entered into strategic alliances with foreign or domestic enterprises. Others positioned themselves by specialising in the provision of certain specific services. Yet others chose to consolidate and form large groups. This approach led to takeovers and amalgamations of financial activity in new companies that provide a broad spectrum of financial services to consumers. In South Africa the financial system has also been undergoing a major modernisation and strengthening. The impetus for this change came after 1994 when foreign financial institutions began to participate directly in the South African market. The policy followed by the authorities of gradually removing exchange controls, opened up new opportunities for the diversification of investments. As a result, foreign financial institutions set up large numbers of subsidiaries, branches or representative offices in South Africa. At first the domestic financial institutions felt the impact of increased competition, but they now seem to have adapted well to the changed circumstances and have introduced various measures to improve their efficiency. The depth, breadth and stature of South Africa's financial markets has been increased by a number of important developments in recent years. The development of a eurorand bond market, the introduction of primary dealers in bond auctions and the successful launching of a domestic medium-term note programme deepened the South African bond market. Financial instruments have also been diversified and aligned more closely with developments in international capital markets. The Johannesburg Stock Exchange has been restructured to provide for electronic screen trading, corporate and non-resident participation, negotiated commissions and dual capacity trading by brokers. The stock exchange has also successfully forged links with other exchanges in Southern Africa, and now shares with the Namibian Stock Exchange a system for trading, clearing and settlement. Electronic clearing and settlement, the phased dematerialisation of shares and their registration in a central securities depository, are currently being introduced. The objective is to reduce settlement risk through delivery against payments linked to the National Payment, Clearing and