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International Monetary Fund

of Israel or by an Israeli resident company registered for trading on a foreign stock exchange or over the counter; and (v) buy or hold other kinds of foreign assets. A resident may not undertake with a nonresident a derivatives transaction of any kind in which one of the underlying assets is local currency and which involves payment or receipt of foreign currency, unless the transaction is a forward transaction at a pre-set price for a period of no more than 30 days.

International Monetary Fund
This Selected Issues paper and Statistical Appendix reviews developments in the structure of the Israeli banking sector, as well as in the key indicators of soundness and profitability in recent years. The paper highlights that Israel’s financial system continues to be dominated by a small number of banking groups. By international standards, the banking system is highly concentrated, with the largest five banking groups controlling almost 95 percent of total assets. The paper also describes developments in exchange restrictions in Israel.
International Monetary Fund. Monetary and Capital Markets Department
This Technical Note analyzes over-the-counter (OTC) derivatives market reforms in South Africa and identifies vulnerabilities that may potentially impact financial stability. South Africa is committed to reform its OTC derivatives market to reduce vulnerabilities and increase transparency. Reforms are being implemented through the Financial Market Act and Regulations for banks, reflecting the Basel III capital requirements. Swift progress on the consultation and issuance of FMA regulations, trade repository regulations, and related notices are warranted to proceed with reforming the OTC derivatives market. Secondary legislation still needs to be finalized and will contain requirements for financial market infrastructures.
DANIEL P. CUNNINGHAM

amount. Notional amount, however, grossly overstates the true credit risk generated by OTC derivatives activity and the true economic impact of the transactions. The notional principal amount outstanding of swaps increased from $867 billion in 1987 to $3,872 billion in 1991. 2 In fact, the replacement costs—the market values of derivatives transactions—for all OTC derivatives tend to be about 2-3 percent of the gross notional amount. An illustration of the changing market value of a derivatives transaction is helpful. At the start of a basic interest rate swap, the