Johannesburg - The South African banking system remained stable, and banks were adequately capitalised and profitable, the SA Reserve Bank (Sarb) said in its Bank Supervision Annual Report 2008.

This was in spite of the "turmoil experienced in international financial markets and the domestic cyclical economic developments during 2008", Sarb said.

South Africa's top commercial banks - Absa, FirstRand, Standard Bank and Nedbank - had all said that future profits would be lower.

This was due to consumers defaulting and debts rising as South Africa's first recession in 17 years took its toll.

According to the Sarb's report, liquid assets held by South Africa's banks exceeded the statutory requirement throughout 2008.

The liquid assets held, measured against the minimum liquid asset requirement, amounted to 115.5% at the end of December 2008.

Sarb said the increase in interest rates, other cyclical economic developments in South Africa and the turmoil experienced in international financial markets contributed to credit risk ratios deteriorating during 2008.

- Sapa