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Local banking system remains liquid and well-capitalised – Central bank

Local banking system remains liquid and well-capitalised – Central bank

The local banking system remains resilient and sound, with solid capital and liquidity buffers in place to withstand risks emanating from internal and external shocks as the world reels from the closure of several regional banking institutions in the United States and a global systemically important bank based in Europe.

This was highlighted by the Bank of Namibia on Wednesday in a statement, further stating that the bank is confident that both the robust regulations and sound oversight of banking institutions in Namibia can shield local institutions from shocks that have shaken confidence the banking system in those countries.

“Banking sector regulation aims to protect depositors’ funds, promote the banking system’s safety, ensure the fidelity of authorised financial institutions, and foster financial inclusivity. Effective banking supervision systems boast suitable legal frameworks that provide regulatory institutions with the legal powers to authorise banks, conduct ongoing supervision, enforce compliance with laws, and undertake timely corrective actions to ensure banking sector stability” the statement read.

Furthermore, the statement said the Bank also abides by the highest standards set by the Basel Committee on Bank Supervision. Through the Banking Institutions Act, 1998 (Act. No.2 of 1998) as amended, its related secondary legislation and supervisory framework compliance is enforced.

“To augment the world-class regulatory and supervisory regime, the Bank recently launched the Automated Regulatory Reporting System, which provides an effective, reliable, and scalable way to detect and address any risks and vulnerabilities or issues in near real-time from submitting information of regulated and supervised entities. This regulatory toolkit is intended to support the Bank in safeguarding financial stability through proactive risk identification and mitigation,” the central bank said.

Unlike the mortgage loan crisis precipitating the 2008 global financial crisis, the current banking
crisis, which originated in a regional lender in the US, is not the result of risky lending or non-performing loans. Instead, it emanates from numerous vulnerabilities, including inadequate risk management practices, which exposed the banking institutions to risks like the rapid repricing
of financial instruments on account of aggressive interest rate hikes to curb stubborn inflation, the bank noted.

Despite the ongoing global developments, the Namibian banking system remains liquid and well-capitalised. In this regard, the total risk-weighted assets stood at 17% at the end of December 2022, higher than the statutory minimum risk-weighted capital requirement of 10%. Similarly, the liquidity position of the banking sector stood at 17.8%, N$10.4 billion above the statutory minimum requirement. Maintaining adequate liquidity is a bank’s lifeline, ensuring it can honour its obligations as they become due.

Johannes !Gawaxab, central bank governor said, “Every bank has its own story and should be treated on its merits. What is happening in those foreign banks, which sparked the current debate, largely has to do with the exposure of those institutions to government bonds vis a vis the interest rates environment. It is not a credit problem or that customers cannot repay their loans. Our circumstances and context are, therefore, different. We have robust rules and regulations to thank for our set of circumstances. We are duty-bound to monitor these current global developments and any spill-over effects. However, as things stand, our institutions are insulated from these events, and our public members can be assured of the stability and soundness of our institutions.”


 

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