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DESPITE the Namibian commercial banks being 34% exposed to government securities, there is nothing pointing to a bank run, and depositors’ money is safe, the Bank of Namibia has said.
Some failed banks in the United States of America and Europe have raised fears, globally, on banking leadership and how they have been using deposits entrusted to them.
This is particularly because the failed banks had thrown so much money into government bonds amid high interest rates, which has over the years proved to be an unsustainable way of investing deposits.
Responding to these fears, the bank’s spokesperson, Kazembire Zemburuka, said Namibia’s banking system remains resilient and sound, with solid capital and liquidity buffers in place to withstand risks emanating from internal and external shocks.
“The Bank of Namibia is confident that both the robust regulations and sound oversight of banking institutions in Namibia can shield local institutions from shocks that have shaken confidence in the banking system in those countries,” said Zemburuka.
The banking sector in Namibia comprises nine authorised banking institutions, which are categorised as seven commercial banking institutions, a branch of a foreign banking institution, and a representative office.
These banking institutions are the primary mobilisers of funds for the public and the main source of financing for business operations and economic activities in Namibia.
Data from the central bank shows that these banks had an asset base valued at N$181 billion.
Deposits entrusted to banks at the end of October 2022 stood at N$118 billion, a majority of which could be recalled at any time.
Current and call accounts had a combined N$62 billion, indicating that most cash kept at the bank is what depositors require in their daily operations.
Zemburuka said 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.
He added that, unlike the US and Europe, the situation in Namibia is unique.
“Banking institutions in Namibia, as at 31 December 2022, allocated only 34% 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% of its assets in long-duration fixed income securities,” he said.
Furthermore, he said 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. Moreover, the Namibian banking sector held a liquidity buffer of N$11,1 billion during December 2022, indicating that liquidity needs can be met,” he said.
Zemburuka said 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% at the end of December 2022, higher than the statutory minimum risk-weighted capital requirement of 10%. Similarly, the liquidity position of the banking sector stood at 17,8%, N$10,4 billion above the statutory minimum requirement,” he said.
Maintaining adequate liquidity is a bank’s lifeline, ensuring it can honour its obligations as they become due.
Governor Johannes !Gawaxab said every bank has its own story and should be treated on its merit.
“What is happening in those 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. It is not a credit problem or that customers cannot repay their loans. Our circumstances and context are, therefore, different,” he said.
The governor added that Namibia has robust rules and regulations to thank for the stability of the banking sector.
“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 members of the public can be assured of the stability and soundness of our institutions,” he said.
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