Pretoria - Cabinet has welcomed plans by the South African Reserve Bank (SARB) to restructure African Bank Limited (Abil).
“Cabinet welcomes the plans by the SARB and a consortium of investors from the financial sector to restructure Abil. This will assist to appropriately safeguard retail depositors and minimise losses for investors in Abil.
“This will also ensure the country’s financial sector remains strong and robust,” said Minister in the Presidency for Planning, Monitoring and Evaluation, Jeff Radebe on Thursday.
The Minister was briefing reporters following Cabinet’s fortnightly meeting that was held in Cape Town.
At a press briefing earlier this month, Reserve Bank Governor Gill Marcus announced that Abil has been put under curatorship. Abil will receive a R10-billion capital injection by a range of banks such as Capitec Bank and Investec Bank Limited, which have formed a consortium to underwrite the R10-billion capital raising.
The Reserve Bank said it would pay R7 billion of African Bank’s bad loan book. The bad book comprises a substantial portion of the non- and under-performing assets. The bad book currently has a book value net of specific impairments of R17 billion.
“Cabinet emphasised the importance of the financial services sector to economic growth and highlighted that government, through National Treasury, will continue to strengthen the sector through its oversight, and improve regulatory coordination,” said Minister Radebe.
Subsequent to this, it has also emerged this week that rating agency Moody’s downgraded Capitec Bank. The SARB said it had taken note of this but did not agree with the decision.
Two reasons were given for the rating action: a lower likelihood of sovereign systemic support based on decisions recently taken in relation to African Bank Limited, and heightened concerns regarding the risk inherent in Capitec’s consumer lending focus.
The rating agency also announced the downgrade of the country’s biggest four banks by one notch to Baa1.
“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,” said the SARB.
The Reserve Bank considers the local banking sector to be healthy and robust. - SAnews.gov.za
