SA banks may battle to meet new rules

Pretoria - South Africa’s banks will face a “significant challenge” to meet tougher liquidity requirements under new global banking regulations, the Reserve Bank said in a report on Thursday.

Banks in South Africa face minimal exposure to peripheral European economies such as Greece, Ireland, Portugal and Spain, the central bank also said its semi-annual Financial Stability Review.
 
Although well capitalised, South Africa’s banks rely heavily on short-term funding, meaning they will need to spend more to meet requirements on liquid assets.
 
“The sector’s reliance on short-term wholesale funding for long-term assets is likely to present a significant challenge to banks in meeting the liquidity coverage ratio and the net stable funding ratio,” the Reserve Bank said.

The liquidity coverage ratio, which is due to be introduced by 2015, requires banks to hold more liquid assets such as government debt.
 
The net stable funding ratio, expected by 2018, deals with a bank’s longer-term liquidity and is likely to be costly for South African lenders, analysts have said.

Absa Group [JSE:ASA], majority owned by Britain’s Barclays, has said it will need $43m this year to boost its liquidity buffer after spending a similar amount in the previous year.
 
The Reserve Bank also said that South African banks’ exposure to Greece, Ireland, Portugal and Spain totalled R943.21m as of end-June, or just 0.03% of the industry’s total credit exposure.
 
South Africa’s banking industry is dominated by four large lenders: Standard Bank Group [JSE:SBK], FirstRand [JSE:FSR], Absa and Nedbank Group [JSE:NED].