The South African Reserve Bank, in pursuit of its primary objective, must perform its functions independently and without fear, favour or prejudice, but there must be regular consultation between the Bank and the Cabinet member responsible for national financial matters.” But this notion of the Reserve Bank as an independent institution is often misunderstood.
Third, one has to accept Knightian uncertainty and protect regulation against it – human behaviour changes, irrational exuberance prevails, extreme events like herding behaviour repeat themselves, and market actors will always test the limits of models. We cannot model these challenges away. That’s why we need backstops.