Saturday, August 18, 2018 | 08:20 AM

Financial Stability

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Maintaining financial stability is clearly essential for the Bank to achieve its mandate. Under the Bank of Botswana Act, the first and foremost of the objective of the Bank is the maintenance of monetary stability. In turn this requires a liquid, solvent and soundly-based financial system. Financial stability is also an essential precondition for achieving the Bank's second major objective under the Act, which is to foster financial conditions conducive to the balance and sustained development of Botswana.

In line with this mandate, as part of a wide-ranging reorganisation that came into effect on July 1, 2010, a new Financial Stability Division was established within the Bank. Financial stability is multi-dimensional in nature and recent global financial crisis and accompanying economic recession has underlined the fact that central banks need to ensure that they are properly equipped to deal with its possible manifestations. The pivotal role of banks in the financial system is seen from the significant contribution which the sector makes to the stock market. In addition, banks play an instrumental and indispensable role in the development, marketing and branding of high-value financial products in the capital market. For these reasons, the Bank needs to monitor closely not only macro-prudential variables across the financial sector but economic developments more generally from the perspective of how they might impact on the stability of the financial system. Once fully operational, the new Division will underpin and enhance the Bank’s capacity in this crucial area.

At present, to support financial stability the bank imposes relevant licensing and reporting requirements over the institutions that it supervises. The framework for these is set out and backed by relevant legislation and regulation. Financial crime, such as money laundering, also poses major risks to financial stability, and the Bank is actively involved in both national and regional anti money laundering (AML) activities.

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