Namibian financial system resilient to shocks

By Timo Shihepo

WINDHOEK – Despite testing times, the Namibian financial system continued to be sound, robust and resilient to shocks according to a report jointly realised this week by the Bank of Namibia (BoN) and the Namibia Financial Institutions Supervisory Authority (Namfisa).

The report assessed the stability and resilience of the local financial sector to internal and external shocks. The report also looked at specific risks stemming from the macroeconomic environment, domestic household and corporate debt, the banking sector, the non-banking financial sector and payment as well as settlement systems.

Based on the assessments the report concluded that the financial sector is financially sound but it will be continued to be monitored for possible risks to financial stability from domestic, regional and global environments.

The monitoring is necessary because Namibia’s small open economy is facing a difficult time brought upon by the political situation in South Africa and low commodity prices being experienced globally.

The financial system has however continued to perform well since the last report was released. It continues to withstand an array of developments in the global and domestic economies.   

It continued to make profit with no disruptions or disorderly functioning of key financial services despite unfavourable domestic and global economic conditions.

According to the report, both the banking sector and non-banking financial institutions have been performing exceptionally well. The banking industry remained adequately capitalised and maintained capital positions well above the minimum requirements during 2016.

“The assets for the banking sector continued to grow, although at a lower rate, while the non-performing loans ration improved slightly from1.6 percent in 2015 to 1.5 percent in 2016,” part of the report reads.

Growth of the assets of the non-banking financial institutions sector also remained positive and is expected to continue moving forward. Since the last report, the capitalisation of provident, insurance and investment institutions has been adequate to ensure solvency, while funding levels were in excessive of the statutory requirements.

“These levels have been sufficient to withstand the shocks and risks to which these institutions are exposed.”

The financial sectors payment system maintained a high system availability with one disaster recovery test conducted successfully in settlement system. On-site activities were also conducted to assess the operations of new and existing participants based on their risk profiles as established through the offsite monitoring activities.

From a risk profile point of view since the last report, most risks have either subsided or remained unchanged, with minimal corresponding impact on the stability of the financial system.

“These risks to Namibia’s financial stability remained low and well absorbed during 2016, when compared to that of 2015,” says the report in part.

May 2017
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