Johannesburg - The creation of a liquidity
pool which South African banks can tap to meet the global
industry's new Basel III regulatory requirements relieves the
pressure for a credit rating downgrade when the new laws come
into effect, Moody's said on Wednesday.
The central bank has told lenders in Africa's biggest
economy that it has approved the creation of a Committed
Liquidity Facility after quantitative impact studies on seven
banks showed some had inadequate cash at hand to cover outflows
in a stress scenario.
"I wouldn't say it will change the outlook but it diminishes
the risks of possible pressure on the ratings because of the
liquidity requirements coming in," Moody's senior analyst Nondas
Nicolaides told Reuters.
Earlier this year Moody's downgraded by a notch the credit
rating of five South Africa banks - Standard, FirstRand
, Absa, Nedbank and Investec,
citing constrained public finances and a measure of the
government's ability to support multiple institutions needing
financial help at the same time.
Analysts say South African banks are well capitalised and
sound and are unlikely to require systemic support.
The Basel III regulations that are still under discussion
are meant to protect taxpayers from having to bail out banking
institutions in the event of another financial crisis.
Before the Committed Liquidity Facility came in the system's
liquidity coverage ratio (LCR) of liquid assets held as a
percentage of a bank's net cash outflows over a 30-day period
was around 65-68 percent, compared with the 100 percent
requirement under a stress scenario of Basel III, Nicolaides
The LCR, for which the central bank created a fund, will
come into effect in 2015.
"Banks are unlikely to tap this liquidity line at this stage
because there is no immediate need and the LCR is still not
effective. There is quite a lot of liquidity in the system at
the moment," Nicolaides said.