Global credit crisis spares SA banks

By Richard Stovin-Bradford While banks in the rest of the world rank liquidity – the supply of money – as their prime concern, South African banks quizzed by the Centre for the Study of Financial Innovation for its annual Banking Banana Skins survey placed liquidity only seventh in their list of top risks.

This shows the extent to which South Africa’s main banks have remained relatively unscathed by a global credit crisis that has forced top banks elsewhere to turn to shareholders and sovereign wealth funds in Asia and the Gulf to replenish their balance sheets after suffering heavy losses.

Tom Winterboer, the local banking partner of audit firm PricewaterhouseCoopers, which sponsored the survey, said: “To the credit of the Reserve Bank, it started looking at (SA) banks’ liquidity a couple of years ago.”

The top two issues bothering South African bankers are credit spreads followed by credit risk.

The survey explains that variations in the cost of credit to different classes of borrower created opportunities for banks to trade one class against another.

However, the sub-prime bubble compressed these spreads as the market ignored the extra risk in low class assets.

In its high ranking of credit risk – the second issue for all respondents – SA was little different from its global counterparts. The strongest concerns listed by global respondents chime loudly with bankers locally.

They were consumer indebtedness, the overheated housing markets, sub-prime woes and soaring credit card debt.