The successful bail-in of creditors in African Bank, a small South African monoline lender, provides an opportunity to evaluate the intended and unintended consequences of new resolution tools. Using a dataset that matches quarterly, daily, and financial-instrument level data, I show that the bail-in led to money-market funds “breaking the buck”, triggering significant redemptions and some financial contagion. To limit potential systemic effects, the authorities used complementary interventions, including imposing discretionary liquidity restrictions on mutual funds and market-making facilities for affected financial instruments. This supported a sustainable restructuring of the bank and reduced financial spillovers. The lesson is that future interventions using these new resolution tools should take into account the potential unintended systemic implications, particularly in smaller jurisdictions where there is a high degree of interconnectedness between bank and nonbank financial institutions.

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Following the collapse of Saambou bank in February 2002, contagion rapidly spread amongst South African small and medium-sized banks. By the end of 2003, half of the country's banks had deregistered. The paper constructs a unique monthly bank-level data set to show that the banks that failed were those with short-term liabilities from other financial institutions. An initial delay in providing liquidity to solvent banks in distress and raising interest rates may have exacerbated the crisis. The need for prompt, swift action echoes lessons from banking panics throughout history.

Exchange controls were part of a complex system of maintaining some financial stability during apartheid, particularly as the apartheid economic system began to implode, and the macroeconomy deteriorated. The centrepiece of the system was a complex system of multiple exchange rates, with residents and non-resident transactions taking place under different currency regimes, creating at different periods a 'blocked rand', a 'securities rand', a 'commercial rand' and a 'financial rand'. Exchange controls appear to have assisted the apartheid regime to maintain macroeconomic stability despite other poor policy choices. However, measured in terms of monetary independence and exchange-rate stability, even this was a mixed success. Much like apartheid itself, short-term economic benefits came with severe long-term political, social and economic distortions. Twenty years later, some of the distortions remain, and, indeed, some of the controls. This highlights the need for ongoing reforms to make the post-apartheid South African economy less distorted and more competitive, and to continue to develop a modernized system for managing external risks.

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