SA: LIQUIDITYgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
A liquidity shortage experienced by small South
African banks toward the end of 1999 highlighted
vulnerability in the country's banking system.
. . .
He told a banking conference in Pretoria that the
liquidity pressures had been sparked by a flight
to quality by investors caused by Y2K concerns.
-- spider (firstname.lastname@example.org), August 29, 2000
ACTION ON LIQUIDITY PAID OFF: WIESE
JOHANNESBURG August 28 2000 Sapa-INet-Bridge
A liquidity shortage experienced by small South African banks toward the end of 1999 highlighted vulnerability in the country's banking system.
But the prompt corrective action taken by the South African Reserve Bank's (SARB's) bank supervision department had enabled the banks to restore their statutory requirements and to fund their activities on a sustainable basis, the registrar of banks, Christo Wiese said on Monday.
He told a banking conference in Pretoria that the liquidity pressures had been sparked by a flight to quality by investors caused by Y2K concerns.
"The small banks immediately experienced cash shortages, which were funded by the discounting of their cash reserves held at the SARB and of their statutory liquid assets portfolio through the facility.
"And, as has often been proved in the past, small banks are more prone to suffer from any uncertainty in the banking sector," Wiese said.
He said it appeared that the ratio of short-term funding to total funding was much higher for small South African banks than the trend was internationally.
This inevitably led to larger short-term mismatches and greater liquidity risk.
Wiese said the corrective actions taken had included requiring the banks to downsize their asset portfolio in order to enable them to fund their remaining assets through utilization of the core funding base. "The department also intensified its supervision by requiring these banks to submit daily cash flow statements and maturity profiles to allow the department to monitor the situation in each of the small banks.
"In some instances, the shareholders of the banks were forced to inject fresh capital to improve the gearing ratio between deposits and the available capital," he said.
-- (email@example.com), August 31, 2000.