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Roundup: S. African banks safe, sound despite sluggish global financial growth

Xinhua, May 25, 2016 Adjust font size:

The South African Reserve Bank (SARB) said on Wednesday that the country's banks are sound, capitalized and safe despite the sluggish global financial growth.

South Africa is currently facing a severe drought, rising interest rates, reduced business, lower investor confidence and reduced commodity prices, and this made it a challenge to the banks, SARB Deputy Governor Kuben Naidoo said while releasing the 2015 Bank Supervision annual report in Johannesburg.

He said,"Our banks are sounder, safe and more resilient. It is stable and profitable. Banks operating in South Africa remained adequately capitalized. The sector was and continues to be supported by the regulatory and supervisory framework that creates environment which promotes safety and soundness of individual banks and the whole banking system as well as supporting an environment conducive to sustainable investment."

From January 1, 2015 to December 31, 2015, South African banks had an increasing operating profit of 20. 8 percent year on year, compared to the previous year when they had 7.4 percent, according to the report.

The major contributor to the increase to the operating profit was the rise in net interest income, no-interest revenue and decrease in credit losses. The bank's total equity increased by 7.4 percent from R318 billion (20 billion U.S. dollars) in December 2014 to R342 billion (22 billion dollars) in December 2015.

Naidoo also said, "This was not based on any evidence that Deutsche Bank or Capitec facilitated transactions relating to money laundering and/or financing of terrorism activities. South Africa was the first country that has an overall compliant in terms of liquidity and capital in implementing the Basel Committee on Banking Supervision. We were the first country to be compliant. We know Russia was later declared compliant, with India partially compliant."

South Africa's total banking sector assets increased by 15.7 percent year on year from R4,176 billion (267 billion dollars) in December 2014 to R4,831 billion (309 billion dollars) by end of last year.

Naidoo, however, noted that as the South African banks expand to other African countries they expose themselves to greater risks.

Last year, the SARB carried out on-site inspections of two banks operating in other African countries. It was discovered that parent companies have to make efforts to have adequate oversight of their operations outside the country.

Rene van Wyk, the Registrar of Banks, said, "There is an indirect or direct exposure in the countries like Lesotho, Botswana, Swaziland and Mozambique. Its like in a family, when children are away you never know what they are doing."

Van Wyke expressed concern over the illegal schemes which some South Africans are getting involved in.

last year, the SARB investigated 41 new schemes, finalizing 22 and by the end of the year, 19 were still active.

The SARB confirmed that they investigated the MMM scheme, started by the Russian ex-convict Sergey Mavrodi and handed the results to the National Credit Commission.

The bank said people should be cautious and exercise vigilance in their investment choices.

Van Wyk added, "People have to exercise prudence in joining these get-rich scheme. The process to close is time consuming and by the time we do it the investor money would have gone."

The SARB will this year focus on cyber security and crime which is a threat to the banking industry.

The bank states that they will continue to ensure that the financial sector remain sound.

Ban Wyk said there is still appetite for investment in the banking sector in South Africa.

"There are inquiries about licences in the country by some foreign banks. There is interest in the South African banking sector. Of course others want to use it as a platform to explore other African countries. Our banking sector have weathered the storm to remain safer and strong,"he said. Endit