Address by Mr T.T. Mboweni, Governor of the South African Reserve Bank, to trainee chartered accountants in the Western Cape, at the South African Institute of Chartered Accountants Cape Town 2 October 2006 Honoured guestsLadies and gentlemen 1.  Introduction  Thank you for the invitation to address you today. Financial markets have become increasingly globalised and our markets are no exception. Within this context, regulation according to international best practice, has a big part to play in ensuring the stability of the financial sector. You may be aware the international community has adopted some measures to harmonise the regulation of banks. Today I will provide a brief overview of two of these initiatives namely, the new Capital Accord and the Basel Core Principles, which have been adopted under the auspices of the Bank for InternationaI Settlements (BIS). I will pay particular attention to how these initiatives impact on the regulation of banks in South Africa. As future chartered accountants, these developments will have an important impact on your working lives. I will conclude by making some observations on the performance of the South African banking sector. 2.  The Bank for International Settlements  Many industries and businesses have established associations, whose aims are to conduct research, review important issues and promote the development of these industries or businesses. The BIS, established in 1930, could be described as a club or association for central bankers. The BIS was established in the context of the Young Plan, which dealt with the issue of the reparation payments imposed on Germany by the Treaty of Versailles following the First World War. The name of the BIS is derived from this original role, and was also created to promote central bank cooperation in general.The reparations issue quickly faded, focusing the activities of the BIS entirely on world-wide cooperation among central banks and, increasingly, other multi-lateral agencies in pursuit of monetary and financial stability. Today, central banks from 55 countries are members of the BIS. The BIS fulfils its mandate by acting as a forum to promote discussion and policy analysis among central banks and within the international financial community. It is also a centre for economic and monetary research; a prime counterparty for central banks in their financial transactions; and acts as an agent or trustee in connection with international financial operations. The most important meetings held at the BIS are the regular meetings of Governors and senior officials of member central banks. I regularly attend these meetings which are held every two months in Basel. These gatherings provide an opportunity for participants to discuss the world economy and financial markets, and to exchange views on topical issues of central bank interest or concern. Other meetings of senior central bank officials focus on the conduct of monetary policy, the surveillance of international financial markets and central bank governance issues. The growth of international financial markets and cross-border money flows in the 1970s highlighted the lack of efficient banking supervision at an international level. National banking supervisory authorities basically regulated domestic banks and the domestic activities of international banks, while the international activities of these banks were not always closely supervised. The collapse in 1974 of Bankhaus Herstatt in Germany and of the Franklin National Bank in the United States prompted the G10 central bank Governors to set up the Basel Committee on Banking Supervision. This Committee, known as the Basel Committee, concerns itself with guidelines for international co-operation in bank supervision. The Committee, which includes representatives from the major supervisory agencies as well as from central banks, provides a forum for regular cooperation on banking supervisory matters. Over the years, the Committee has developed increasingly into a standard-setting body on all aspects of banking supervision. 3. The Basel