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Trouble ahead for SA banks, warns Moody's

Dec 05 2012 11:55 AFP

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Johannesburg - Moody's ratings agency, on Wednesday, warned South Africa's banks that weak economic growth in tandem with their exposure to government securities poses a risk of serious trouble ahead.

Describing the operating environment for South Africa's banks as "challenging", Moody's forecast modest economic growth of 3% next year.

That, the agency said, was below the pace needed to kick-start manufacturing, "tackle high unemployment and substantially improve living standards," putting a dampener on banks' business and eroding the quality of assets.

Moody's warned that banks were over-exposed to government securities, which were recently downgraded and which make up more than 150% of capital at the largest banks.

Downgrading the outlook for the banking system to "negative" Moody's also warned that banks were over reliant on deposits from other institutions to maintain liquidity.
   
 

 

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