• 10 tips to find bargains

    Susan Erasmus gives advice on how bargain hunters can get the most bang for their buck.

  • Inside Labour

    Labour's bitter breaches need to be seen in historical context, says Terry Bell.

  • Rich getting richer

    Economists differ on how to tackle the chasm between rich and poor, says Leopold Scholtz.

See More

Moody's: SA banks plan cuts rating risk

May 16 2012 16:46 Reuters

Related Articles

JPMorgan investment chief resigns

Bank reacted badly - JPMorgan CEO

Massive loss shocks Wall Street

Spain takes state control of Bankia

Shares edge up on Spanish bank hopes

Union claims Absa retrenchments withdrawn


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 said.

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.
credit ratings  |  banks  |  moody's



Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Add your comment
Comment 0 characters remaining

Company Snapshot

Brought to you by BizNews

More from BizNews

We're talking about:


Johannesburg has been selected to host the Global Entrepreneurship Congress in 2017. "[The congress] will ensure that small business development remains firmly on the national agenda and the radar screen of all stakeholders, the Small Business Development minister said.

10 most expensive cars In the world

This is car porn at its best!


Luxury living

5 millionaires turned murderers
The youngest billionaires in the world and how they made it
Watch: Flying first class has never been this luxurious!
What to expect inside a royal nursery

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

How do you see your boss? He/sheis:

Previous results · Suggest a vote