South African Reserve Bank


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About South African Reserve Bank

The South African Reserve Bank was established in 1921 as a result of unusual financial and monetary conditions stemming from World War I (1914–1918).

At the time, commercial banks issued banknotes to the public, which had to be backed by gold. But the price of gold in the United Kingdom rose and became higher than the gold price in South Africa. Therefore, a profit could be made by converting banknotes into gold in South Africa and selling the gold in London. This meant that commercial banks had to buy gold at a higher price in London (for re-import into South Africa to back their banknotes in issue) than the price at which they converted their banknotes into gold. This “obligation to trade at a loss” posed a serious threat to the ability of banks to continue meeting their obligations.

To protect their financial viability, the commercial banks asked the government to release them from the obligation to convert their banknotes into gold on demand. This led to the Gold Conference of October 1919. Following the recommendations of the conference, a Select Committee of Parliament recommended the establishment of a central bank to assume responsibility for the issuing of banknotes and for taking over the gold held by commercial banks. The South African Parliament accepted the recommendation and published the Currency and Banking Act, Act No. 31 of 1920 in December 1920, which provided for the establishment of the SARB… Continue reading about South African Reserve Bank here.



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