Publications
Partners
Johannesburg - The South African Reserve Bank (Sarb) on Tuesday it did not agree with the reasons given by Moody’s Investor Service (Moody's) to downgrade four of the country’s major commercial banks.
"The South African banking sector remains healthy and robust," Sarb said in a statement disputing Moody's action.
Moody's downgraded Standard Bank, FirstRand, Absa and Nedbank and put them on review for further cuts, saying there was a lower likelihood of support from the reserve bank to protect creditors after African Bank's debt crisis.
"We do not agree with the rationale given in taking this step, nor do we agree with the assessment it is based on."
"Once again, Moody’s refers to a lower likelihood of sovereign systemic support based on decisions taken recently in relation to African Bank Limited (African Bank).
It said this concern is in sharp contrast to the support actually provided by the Sarb.
"With a capital adequacy of 14.87%, of which Tier 1 capital comprises 12.05%; a financial leverage multiple of 13.43, impaired advances to gross loans and advances of 3.57% and a return on equity of 14.25%, the South African banking sector remains healthy and robust."
Last week, the ratings agency downgraded Capitec by two notches, and placed it on review for a further downgrade, because of a lower likelihood of support from the Sarb following the African Bank fiasco.
Moody's said the terms of African Bank's roughly R17bn bailout by the Sarb showed investors in other larger banks were less likely to be bailed out if they hit trouble.
- Reuters with Fin24
