Local financial system remains stable says Macroprudential Oversight Committee
The domestic financial system continues to demonstrate stability, robustness, and resilience, amid heightened risks and vulnerabilities originating from both the domestic and global sphere.
This is according to the first Macroprudential Oversight Committee (MOC) meeting of the Bank of Namibia held this week.
In addition, the banking and non-banking sectors remained liquid and well-capitalized to absorb potential losses, a statement from the central bank said.
“To support the domestic economy, the MOC, concluded that there is a need to enable a macroprudential policy intervention on the existing Loan-To-Value regulation,” the BoN said in a statement.
The MOC also emphasized continued monitoring of inflationary pressures and geopolitical tensions, which have the potential to undermine economic recovery and negatively impact the financial system.
Meanwhile, the banking sector’s balance sheet growth remained strong, reflecting an improved liquidity position and adequate capital levels.
On a quarterly basis, total assets for the sector grew by 5.3% to N$173.2 billion in the first quarter of 2023, driven by cash and balances at banks, as well as net loans and advances.
“The liquidity ratio of the banking sector stood at 19.1% during the first quarter of 2023, from
17.8% in the last quarter of 2022, due to diamond sales, government spending, Public capital inflows, and subdued private sector credit extension,” the BoN said.
Furthermore, the banking sector maintained adequate capital levels to meet the regulatory requirements and absorb potential losses. There was, however, a marginal decline in the Return on Equity and Return on Asset ratios, indicating reduced profitability due to decreases in both interest and non-interest income earned by the banking sector. Asset quality, as measured by the non-performing loans ratio, deteriorated slightly, but remained below the supervisory intervention trigger point of 6%.
Going forward, the burden of debt servicing for households and businesses, along with slower growth expectations and tight monetary policy, may apply additional pressure on asset quality, the central bank said.