Financial sector remains sound

Ubson Uanguta, Deputy Governor of the Bank of Namibia

The Bank of Namibia and the Namibia Financial Institutions Supervisory Authority jointly announced that Namibia’s financial sector was stable when the Financial Stability Report for 2015 was presented this week.

Commenting on the report, Bank of Namibia Deputy Governor and Head of Financial Stability, Ebson Uanguta drew attention to key highlights such as the robustness of the non-banking financial sector, efficient and effective payment system infrastructure and a stable domestic financial system.
“The overall assessment concludes that the financial sector is healthy and sound but continuous monitoring of risks to financial stability from the domestic, regional and global environments is needed as a prudential measure.”
Uanguta however drew attention to the reliance of banking institutions on mortgages. Speaking off the cuff, he said “mortgages constitute 50% of banking assets. This situation may require policy intervention. According to him, the banking sector is expected to remain sound and explained that stress tests showed that the sector was resilient. “The banking sector is doing twice as better than banks in the Sub-Saharan African region.” He explained that local commercial banks could withstand shocks up to 300 basis points in the likelihood it occurred.
A worrisome feature of the report was the growth in household debt, driven by mortgages, overdrafts and instalment credit. Overall, the ratio of household debt to disposable income rose to 83.9% in December 2014. Said Uanguta, “this calls for comprehensive monitoring and targeted policy interventions to address growth in household indebtedness.” This, he said, left unchecked would lead to systematic risks in the financial system.
Other positive points from the report was the stability of the non-banking financial sector under the auspices of the Namibia Financial Institutions Supervisory Authority. Said Uanguta, “growth of the assets in the non-banking financial institutions sector was positive. The capitalisation of provident institutions was adequate to ensure solvency and funding levels are in excess of those required by statute.”
On the safety front, the industry embarked on a Europay-MasterCardVisa (EMV) compliance project for various cards used in the National Payment System. This international standard, Uanguta said, would require cards to have a chip instead of a “magstripe” for authenticating card transactions, making it much more difficult for these cards to be cloned. According to him, the industry is expected to have all debit, credit and hybrid cards EMV compliant by 30 September 2015.