Governor, Gill Marcus,  Pretoria, 4 November 2010 Introduction It gives me great pleasure to welcome you to the third biennial policy conference of the South African Reserve Bank. The aim of this conference series is to stimulate debate on current topical issues and to add value to these discussions. In order to ensure this, we have invited economists from the policy arena, the private sector and academia. Having a wide cross-section of economists with different perspectives in our midst should enrich a lively debate. We are particularly fortunate to have a number of well-respected local and international economists present, and we are grateful for the opportunity to interact with them. Allow me to also welcome participants from some of our neighbouring countries, including Governor Shiimi of Namibia, Governor Senaoana of Lesotho, and Deputy Governor Mdluli from the Central Bank of Swaziland accompanied by senior officials from their Central Banks. The previous conference, held in late October 2008, took place a few weeks after the outbreak of the global economic crisis. At the time, the full implications were unclear. Two years later, the world has emerged from the recession, but is not out of the crisis, and the global outlook remains uncertain. Some advanced countries are still struggling to stimulate their economies: quantitative easing continues in the United States and Japan, and monetary policy remains accommodative in the United Kingdom, and in the euro area. The banking sectors in Europe and the US remain under pressure. Against the backdrop of fiscal austerity measures, monetary policy is likely to remain loose for longer, which has implications for emerging-market economies in particular, where significant capital inflows have put pressure on their currencies. Unfortunately, the global imbalances that were at the heart of the crisis in the first place are still with us, with few prospects for an imminent resolution of the problems. Nevertheless, it is an opportune time to assess some of the implications of the crisis. Many questions are being asked: for instance, is there a changed role of Central Banks regarding Monetary Policy, Financial Stability and Regulation? This year the theme of the conference is: “Monetary Policy and Financial Stability in the Post-crisis Era”. Within this broad theme we will be focusing on three important areas, namely the implications for banking sector regulation, for emerging markets and for monetary policy. Three plenary sessions will address these themes and I will make a few introductory comments on each of them. The regulatory response to the financial crisis The global financial crisis has spurred a review of banking regulations. Much of the discussions in international forums, such as the International Monetary Fund and the Bank for International Settlements, have centred round the appropriate regulatory responses to prevent a recurrence of unfettered lending by banks in future. Achieving global consensus on these issues has not been easy, and while progress has been made, significant differences still remain. There is the risk that the crisis will result in excessive politicisation of regulatory issues in a quest to ensure that someone is seen to be responsible for the crisis. This has the potential to create a new moral hazard by giving the impression that with the agreement on Basel III, the system is safe. But the regulators do not run the institutions and there are no absolute guarantees of safety. Nevertheless, if things do implode, it would be the regulator that would be deemed to be responsible. The possibility also exists that there has been too much of a focus on banks, rather than on the broader financial system. Over-regulation of banks could not only reduce lending, but it could result in more disintermediation, thus preparing the ground for the next crisis. What the recent crisis has shown is the inventiveness of financial markets to come up with products or institutions that circumvent existing regulations. Furthermore, there is the danger that the pendulum c