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Financial services sector stable – Bank of Namibia Macroprudential Oversight Committee

Financial services sector stable – Bank of Namibia Macroprudential Oversight Committee

The banking sector is liquid, profitable and well capitalised while the non-bank financial sector is sound with funding and solvency positions above the statutory prudential limits, according to the Bank of Namibia’s newly-constituted Macroprudential Oversight Committee.

In a statement signed by the Bank of Namibia Governor, Johannes !Gawaxab, the bank informed the Namibian private sector that the committee’s first bi-annual meeting was held on 14 July 2021. The committee is of the opinion that, overall, “the domestic financial system remains sound, solvent and resilient.”

The committee concluded that the financial system is resilient, solvent and sound on the basis of the latest information available, despite the COVID-19 pandemic, weak domestic growth and challenging macroeconomic conditions. The banking sector remains liquid, profitable and well capitalised, while the non-bank financial sector remains sound, reporting funding and solvency positions above the prudential limits.

The committee also found that asset prices are not subject to undue upward pressure that could impact the stability of the financial system. “The property market was already under pressure over the last few years and prices have stabilised. A significant positive equity build-up was observed where current housing valuations exceeded outstanding mortgage balances by a substantial margin.”

Confirming that the economy is treading water, the committee noted that overall credit extension to the private sector remains muted. The committee did not express an opinion on credit extension to the government as this falls outside its mandate.

Looking at the immediate future, the committee stated “The build-up of financial vulnerabilities emanating largely from the pandemic and fragile growth warrants close monitoring going forward.”

The committee stated that it observed a build-up of vulnerabilities from the deterioration in bank asset quality as reflected in the non-performing loans ratio, and from elevated household indebtedness.

Noting some local and regional risks, the committee assured the Namibian public that it continues to scrutinise and monitor asset quality of the banks to ensure a stable banking sector, adding that the Bank of Namibia will take remedial action if and when necessary.


 

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