SA banks 'largely shielded from crisis'
7 May 2009
South Africa's banks have been largely protected against the direct effects of the global financial crisis, the SA Reserve Bank says in its latest Financial Stability Review.
One of the reasons for this was that domestic banks had not invested as heavily in high-risk securities or complex instruments, the Bank said in its report on Wednesday.
They had also maintained a mostly traditional and relatively conservative banking model, and kept relatively high lending standards.
Domestic banks had enjoyed high profitability for a number of years, maintaining high capital levels, and they remained well capitalised and profitable, the review said. In addition, they had low levels of foreign funding, and had limited activity outside the African continent.
The Reserve Bank said South African banks had primarily felt the impact of the global financial crisis indirectly, through higher funding costs and increased impairments due to retrenchments, as well as the negative impact of lower real economic activity on corporate borrowers.
The magnitude of the indirect impact was reflected in part in the sharp decline in the share prices of banks, it added, with increased signs of pressure build-up in the banking sector evident in the second half of 2008.
In January 2009, impaired advances (bad debt) had increased by 118 percent compared with a year earlier, and by 47 percent since July 2008, the review said.
"Nevertheless, the increase in impaired advances is not seen as a major systemic threat, since it was to be expected after such a prolonged period of extensive credit growth in recent years."
Sapa
