South Africa's financial stability outlook improves, central bank says
JOHANNESBURG, Nov 28 (Reuters) -The outlook for financial stability in South Africa has improved following successful elections, reduced power cuts, and the expectation of lower interest rates, the central bank said on Thursday.
The coalition government formed in June after the governing African National Congress lost its parliamentary majority for the first time in 30 years has markedly improved investor sentiment.
The rand ZAR=D3 has strengthened against the U.S. dollar and remains the only emerging market currency to have done so this year.
South Africa has also had eight months of uninterrupted power supply, after years of rolling blackouts of up to 10 hours a day.
The South African Reserve Bank (SARB) is also well into its rate cutting cycle, reducing its main lending rate ZAREPO=ECI by another 25 basis points to 7.75% earlier this month, with analysts forecasting more cuts from next year.
In the second edition of its Financial Stability Review (FSR), a biannual health check of the financial system, the central bank said risks remained, many of them structural.
"The perpetual risks to financial stability include persistently low and inequitable domestic economic growth, the impact of climate change on the financial sector and the ever-present threat of a cyber incident with systemic impact," it said.
In addition, ratings agencies have kept South Africa at sub-investment grade for years, although a recent upward revision of the outlook by S&P Global has boosted confidence.
To bolster the long term stability of the financial sector, the SARB is requiring banks to build up additional capital buffers from January 2025.
Banks will have to increase their capital holdings by 1%, with the central bank able to tap these funds in periods of stress.
Reporting by Kopano Gumbi
Editing by Mark Potter
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
