South Africa - Financial Sector Assessment
The South African financial system has weathered the shock of COVID-19 but faces growing risks emanating from a weak macroeconomic outlook. The pandemic crisis hit South Africa hard, with nonresident capital outflows accelerating and the domestic a...
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| Format: | Financial Sector Assessment Program (FSAP) |
| Language: | English |
| Published: |
Washington, DC: World Bank
2022
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| Online Access: | http://documents.worldbank.org/curated/en/102601645128957641/South-Africa-Financial-Sector-Assessment http://hdl.handle.net/10986/37079 |
| Summary: | The South African financial system
has weathered the shock of COVID-19 but faces growing risks
emanating from a weak macroeconomic outlook. The pandemic
crisis hit South Africa hard, with nonresident capital
outflows accelerating and the domestic and global slowdown
precipitating a6.4 percent GDP contraction in 2020. A brief
period of liquidity stress was managed with new central bank
facilities and a lowering of liquidity requirements; and
banks proved resilient thanks to sound capital and liquidity
buffers. Asset management and pension assets saw falling
valuations, but redemption pressures quickly dissipated as
markets stabilized. The intensification of the sovereign
financial system nexus emerging from the crisis poses risks
going forward, and a resurgence of the pandemic could
deteriorate asset quality. Banks are resilient in the FSAP’s
baseline; however, amedium-term adverse stress scenario
would cause a significant decline in capital although most
banks would remain sufficiently capitalized. Under stress,
banks could face some liquidity gaps, particularly at very
short maturities, highlighting the importance of continued
close monitoring. The impact of COVID-19 on insurers has
thus far been contained, but prudential rules should be
strengthened to ensure the measure of capital is
sufficiently robust. |
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