Namibian Banks remain resilient and sound – !Gawaxab

Martin Endjala

As the world reels from the closure of a number of regional banking institutions in the United States and a global systemically important bank based in Europe, the Bank of Namibia (BoN) has given the assurance that Namibian banks continue to remain resilient and sound, with solid capital and liquidity buffers in place to withstand risks emanating from internal and external shocks.

Despite the ongoing global developments, the Namibian banking system remains liquid and well-capitalised. In this regard, the total risk-weighted assets stood at 17.0 percent at the end of December 2022, higher than the statutory minimum risk-weighted capital requirement of 10.0 percent.

Similarly, the liquidity position of the banking sector stood at 17.8 percent, N$ 10.4 billion above the statutory minimum requirement. Maintaining adequate liquidity is a bank’s lifeline, ensuring it can honour its obligations as they become due.

The Governor of Bank of Namibia Johannes !Gawaxab said in a media statement, reaffirming that despite global challenges every bank has its own story and should be treated on its merits, adding that what is happening in the foreign banks, which sparked the current debate, largely has to do with the exposure of those institutions to government bonds vis a vis the interest rates environment.

He added that it is not a credit problem or that customers cannot repay their loans, noting that our circumstances and context are different.

“We have robust rules and regulations to thank for our set of circumstances. We are duty-bound to monitor these current global developments and any spill-over effects. However, as things stand, our institutions are insulated from these events, and our public members can be assured of the stability and soundness of our institutions.”he said.

Furthermore, the BoN Governor maintains that the situation in Namibia is unique. Banking institutions in Namibia, as of 31 December 2022, allocated only 34 percent of the banking sectors’ exposure to government bonds, unlike one of the failed US institutions, which is estimated to have held as much as 55 percent of its assets in long-duration fixed income securities.

Additionally, the local banking sector holds shorter-term government instruments that enable them to ensure that their assets and liabilities tenures are aligned. This makes it easier to cover any possible liquidity mismatches.

He pointed out that the Namibian banking sector held a liquidity buffer of N$11.1 billion during December 2022, indicating that liquidity needs can be met.

Meanwhile, the aim of banking sector regulation is to protect depositors’ funds, promote the banking system’s safety, ensure the fidelity of authorised financial institutions, and foster financial inclusivity. Effective banking supervision systems boast suitable legal frameworks that provide regulatory institutions with the legal powers to authorise banks, conduct ongoing supervision, enforce compliance with laws, and undertake timely corrective actions to ensure banking sector stability.

The Bank further abides by the highest standards set by the Basel Committee on Bank Supervision. Through the Banking Institutions Act, 1998 (Act. No.2 of 1998) as amended, its related secondary legislation and supervisory framework compliance is enforced.

!Gawaxab stated that to augment the world-class regulatory and supervisory regime, the Bank recently launched the Automated Regulatory Reporting System, which is said to provide an effective, reliable, and scalable way to detect and address any risks and vulnerabilities or issues in near real-time from the submission of information of regulated and supervised entities.

This regulatory toolkit he said, is intended to support the Bank in safeguarding financial stability through proactive risk identification and mitigation.

The mortgage loan crisis precipitating the 2008 global financial crisis, the current banking crisis, which originated in a regional lender in the United States of America, is not the result of risky lending or non-performing loans.

!Gawaxab said this emanated from numerous vulnerabilities, including inadequate risk management practices, which exposed the banking institutions to risks like the rapid repricing of financial instruments on account of aggressive interest rate hikes to curb stubborn inflation.

This repricing triggered a downward adjustment of investment portfolios, with a concomitant negative impact on profits as well as liquidity in those institutions.

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