Bank Windhoek capital goes to Basel III

After a successful Initial Public Offering last month, Bank Windhoek has said it will use part of the proceeds of the listing to strengthen its mandatory capital requirements ahead of the implementation of Basel III.
The bank recently floated 20.1% of its shares in an Initial Public Offering (IPO) that was oversubscribed 3.5 times raising about N$387.9 million in capital.
The public offer, which opened on 16 May 2013, closed on 13 June 2013.
Although the bank’s capital adequacy ratio stands at a healthy 13.7% as at December 2012, a figure well above the Bank of Namibia’s minimum regulatory requirement of 10%, Marlize Horn, Executive Officer: Marketing and Corporate Communication Services at Bank Windhoek told the Economist upon enquiry that proceeds raised from the listing will be invested in the bank to further increase its Tier 1 capital ahead of the implementation of Basel III.
Part of the capital will also be used to fund significant investment over the next three years in information technology and innovative payment systems to enable the bank to better service its existing client base and to better penetrate the unbanked and under-banked market in the country.
The remaining funds will be retained to enable Bank Windhoek Holdings, the parent company of Bank Windhoek, to consider further investment opportunities as and when they arise.
It was, however, not immediately clear how much the bank will invest to improve its capital reserves and how much will be invested in IT infrastructure.
Tier 1 capital is money that a bank has on its balance sheet to support all the risks it takes arising from lending and trading.
While the Namibian banking sector continued to meet regulatory liquidity requirements, the ratio of liquid assets to average total liabilities to the public declined marginally from 11.1% at the end of the first half of 2012 to 10.9% at the end of the second half of 2012 according to the latest Bank of Namibia Financial Stability report.
A stress test exercise conducted by the central bank indicated that banking institutions are adequately capitalised in the event of an upsurge in the default rate of sectors to which they are exposed. Stress test scenarios were conducted to examine the extent to which the ‘first’ capital buffer (Core Tier 1 capital) would be able to withstand an increase in credit risk in the form of an increase in default rates.