MOODY'S NEGATIVE OUTLOOK FOR SOUTH AFRICAN BANKING SYSTEM

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11 September 2017

STATEMENT BY CAS COOVADIA, MD OF THE BANKING ASSOCIATION SOUTH AFRICA

We note the decision by the Moody’s ratings agency to maintain its negative outlook for South Africa’s banking system. 

The decision is based on our banks’ exposure to the country’s broader economic environment, where growth has been sluggish. 

Despite this, South Africa’s banks remain safe, well capitalised and among the most sound in the world.

Moody’s took cognisance of our challenging operating environment, characterised by weak consumer and investor confidence and rising unemployment. This will have some effect on business opportunities and loan demand, and perhaps impact the quality of some loans. 

However, as Moody also notes in its statement, impaired loans are in fact at historically low levels of only 2.9% of total loans. 

In addition, our member banks keep healthy capital buffers, which allow for loan grown and protection of creditors. Our financially sound corporate clients also benefit our asset-risk position, as Moody’s further notes.

Banks’ prospects are tied to those of the economy. The weak economy in which South African banks operate is a function of the weak leadership of the current government and the climate of policy uncertainty that reigns in almost every sector.

As a country, we face tough economy headwinds, which require tough leadership. In the absence of this leadership and any tangible efforts to grow the economy, those most affected will always be the poorest of the poor. 

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© The Banking Association South Africa 2017