Guest Contributor | Jul 3, 2019 | 0
Financial system and markets remain sound and profitable despite slowdown – Financial Stability Report
The financial system and markets remained sound and profitable during 2017 despite recessionary economic conditions expzerienced, according to a report by the central bank, Bank of Namibia (BoN) and the Namibia Financial Institutions Supervisory (NAMFISA).
According to the Financial Stability Report launched last week, the banking industry remained well capitalized and maintained capital levels well above the minimum prudential requirements during 2017.
“The banking institutions displayed healthy aggregate balance sheet growth, positive profitability and satisfactory liquidity levels during the period under review. Given challenging economic conditions and the associated shedding of jobs, disposable income has come under pressure, resulting in a significant increase in the ratio of non-performing loans (NPLs),” the report highlighted.
The report said similarly, the non-bank financial institutions continued to be financially stable, sound, with growing assets, and with no major risks.
“The payment system and infrastructure also continued to perform efficiently and effectively, and with increasingly robust risk mitigating measures to facilitate safe payments,” the report added.
Meanwhile the report stated that house prices decelerated, however, with no threat to the stability of the financial system.
The report noted that household debt moderated marginally, while corporate debt increased. Although both these ratios remained high when compared to those of peer countries, the associated risks to financial stability remain minimal, the report added.
From a risk profile point of the report noted that the key risk to the financial system was mainly a sreult of the country’s economic slowdown.
“Most risks to the financial system have either remained low or unchanged with minimal potential impact to the financial system. Of concern, however, is the sustained slowdown in the economy over the past two years, which has the potential to reverse the current profiles of risks and increase vulnerability across the board. In the medium to long run, the fiscal consolidation efforts underway may restore and strengthen macroeconomic fundamentals, which could aid the continued stability of the financial system,” the report read.