20 August 2014
South Africa’s banking sector is healthy and robust, the South African Reserve Bank (SARB) said on Tuesday, adding that it disagreed with the decision by ratings agency Moody’s to downgrade the country’s “big four” commercial banks.
Moody’s downgraded Absa, First National Bank, Nedbanka and Standard Bank by one notch to Baa1 on Tuesday and placed them on review for a possible further downgrade, following a two-notch downgrade of Capitec Bank, from Baa3 to Ba2, a few days earlier.
The downgrades come in the wake of the recent collapse of unsecured lender African Bank.
“While the SARB respects the independent opinion of rating agencies, we do not agree with the rationale given in taking this step, nor do we agree with the assessment it is based on,” the SARB’s head of group strategy and communications, Hlengani Mathebula, said in a statement.
According to the central bank, Moody’s refers to a lower likelihood of sovereign systemic support based on decisions taken recently in relation to African Bank.
“This concern stands in sharp contrast to the support actually provided by the SARB,” Mathebula said.
On 10 August, the Reserve Bank announced that African Bank had been put under curatorship and that it would pay R7-billion of African Bank’s “bad” loan book.
African Bank will receive a R10-billion capital injection from a range of banks including Capitec Bank and Investec Bank, which have formed a consortium to underwrite the R10-billion capital raising.
“Notwithstanding this downgrade, Moody’s has confirmed the resilience of the South African banking system and in their own view … notes the broad resilience demonstrated by South African banks in the past, including the management of adverse economic environments, and recognises the solidity of key system financial metrics,” Mathebula said.