SA banks 'can handle new crisis'

Johannesburg - South Africa's largest banks may be among only 9% worldwide which believe they can survive a second financial crisis.

That's according to the Centre for the Study of Financial Innovation and auditing firm PricewaterhouseCoopers' (PWC's) Banking Banana Skins survey, released on Tuesday. The survey comprised 443 global respondents from 49 countries, including six from South Africa.

In 2008, before the start of the crisis, more than 24% of banks worldwide said they were well prepared to deal with economic challenges.

South African banks have held up well in the face of the global financial crisis. They have been highly capitalised - above industry regulation - and despite reporting some large impairment numbers over 2008 and 2009, have been credited with managing risk particularly well.

"We'd like to think that South African banks are among this 9%," said Tom Winterboer, SA financial services and banking leader at PWC, on Tuesday.

Asked whether the South African banking sector was at risk from a number of new senior appointments among the big four, Winterboer said it is a positive sign to see new blood coming through.

PWC partner Johannes Grosskopf added that South African banks had become quite innovative over the last year, bringing in new products and helping consumers restructure debt obligations. He did, however, caution that banks were going to be under pressure to address issues around long-term funding commitments, and reduce their reliance on more complicated financial instruments.

Fraud concerns emerging markets

Another key finding from the survey was that the global banking sector believes its number one risk is political interference in how operations are run and where money is lent.

This is the first time in 15 years that political risk has appeared in the survey. However, it only featured as the seventh-biggest risk among banks in emerging markets.

"It is ironic that politics should emerge as a risk when the banks had to be rescued in the first place. There is clearly a crisis in the relationship between banks and society and it will take years to rebuild," said survey editor David Lascelles.

Other concerns identified from the survey included credit risk, over-regulation, macroeconomic trends and liquidity.

Two themes which featured strongly in the emerging market survey, which did not come through in the global survey, were concerns around currencies and fraud.

"Many South African firms have committed a lot of resources to trying to reduce the impact of this from employees within their businesses," said Grosskopf.

- Fin24.com