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A MEETING between South Africa’s banking top brass, Finance Minister Pravin Gordhan and National Treasury officials on Monday highlighted the rapid increase in unsecured lending as a concern.
The meeting, which follows a similar meeting in May 2010 when bank charges were highlighted as a major concern, agreed that the poorer households were at risk of getting caught in a debt spiral.
"Although some of this lending was by non-bank financial institutions, including retailers, banks could do more to ensure that they lend responsibly and do not contribute to household over-indebtedness," the Treasury said.
While there were currently no systemic risks, the meeting noted and supported the close attention that unsecured lending was receiving from the Reserve Bank’s supervision department. There will be further engagement with financial and non-financial institutions on this issue so that South Africans are not over-indebted.
The international regulatory requirements for banks were discussed. Progress in meeting Basel 3 requirements was noted, and the announcement of measures to assist banks to meet the liquidity coverage ratio was welcomed. Banks noted the on-going efforts of the Treasury and the Financial Services Board (FSB) to ensure South Africa’s compliance with the Group of 20 (G-20) requirements for clearing and reporting of derivative transactions.
However, it was agreed there was more to be done to ensure that all South Africans had access to fair and cost-effective banking services. The services offered to middle-and low-income South Africans must be guided by simplicity, comparability, transparency, accessibility and competitive costs, the Treasury said.
"South Africans must increasingly and more significantly experience banks as facilitators to meet their needs at an affordable cost," it added.
The representatives of banks confirmed the build-up of corporate cash balances and noted that this was a global phenomenon, which was typical of global uncertainty and a lack of investor confidence. This provided opportunities going forward to unlock money for investment in emerging economies.
The meeting heard that lending conditions had improved, with credit extension beginning to rise. The latest banking results point to a recovery in the profitability of banks.
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