BoN monitoring financial vulnerabilities
The deterioration in asset quality and high household indebtedness are directly related to the pandemic-stricken economic climate.
PHILLEPUS UUSIKU
Household indebtedness, slow economic recovery, vaccination hesitancy, the third wave of the Covid-19 pandemic, and the recent unrest in South Africa, could increase the vulnerability of the Namibian financial system.
Despite these challenges, the domestic financial system remains sound, solvent and resilient. These remarks were made by the Macroprudential Oversight Committee (MOC) of the Bank of Namibia (BoN) at its first bi-annual meeting last week under the chairpersonship of the governor of the BoN, Johannes !Gawaxab.
The committee reviewed the overall state of global, regional and domestic macro financial stability, paying particular attention to the developments in and risks to the Namibian financial system.
In a media statement, the central bank noted that the banking sector remains liquid, profitable and well capitalised, while the non-bank financial sector remains sound, reporting funding and solvency positions above the prudential limits.
The committee did not observe undue upward pressure on asset prices that could adversely impact the stability of the financial system, given that the property market was already under pressure over the last few years and prices have stabilised. A significant positive equity build-up was observed where current housing valuations exceeded outstanding mortgage balances by a substantial margin, BoN said.
Overall credit extension remains muted in the domestic economy. With credit extension subdued, there were no signs of excessive new borrowing by either households or businesses that could impact the stability of the financial system, BoN added.
Debt
The committee observed that there was a build-up of vulnerabilities that emanated mainly from the deterioration in banking sector asset quality as reflected in the non-performing loans ratio, and from elevated household indebtedness.
The deterioration in asset quality and high household indebtedness are directly related to the pandemic-stricken economic climate and its impact on the labour market, thus impacting on disposable income and the ability of borrowers to service their debt. The bank continues to scrutinise and monitor asset quality of banking institutions., BoN pointed out.
The relief measures that were implemented at the onset of the Covid-19 pandemic by the Government, the Bank of Namibia and Namibia Financial Institutions Supervisory Authority (NAMFISA) have cushioned the financial system against a potentially severe impact.
The National Payment System (NPS) remains stable, safe, efficient, and effective. The committee is of the view that there is no need for further macroprudential policy interventions at this stage, however, the central bank remains steadfast and will take remedial macroprudential action if and when necessary, BoN concluded.
Household indebtedness, slow economic recovery, vaccination hesitancy, the third wave of the Covid-19 pandemic, and the recent unrest in South Africa, could increase the vulnerability of the Namibian financial system.
Despite these challenges, the domestic financial system remains sound, solvent and resilient. These remarks were made by the Macroprudential Oversight Committee (MOC) of the Bank of Namibia (BoN) at its first bi-annual meeting last week under the chairpersonship of the governor of the BoN, Johannes !Gawaxab.
The committee reviewed the overall state of global, regional and domestic macro financial stability, paying particular attention to the developments in and risks to the Namibian financial system.
In a media statement, the central bank noted that the banking sector remains liquid, profitable and well capitalised, while the non-bank financial sector remains sound, reporting funding and solvency positions above the prudential limits.
The committee did not observe undue upward pressure on asset prices that could adversely impact the stability of the financial system, given that the property market was already under pressure over the last few years and prices have stabilised. A significant positive equity build-up was observed where current housing valuations exceeded outstanding mortgage balances by a substantial margin, BoN said.
Overall credit extension remains muted in the domestic economy. With credit extension subdued, there were no signs of excessive new borrowing by either households or businesses that could impact the stability of the financial system, BoN added.
Debt
The committee observed that there was a build-up of vulnerabilities that emanated mainly from the deterioration in banking sector asset quality as reflected in the non-performing loans ratio, and from elevated household indebtedness.
The deterioration in asset quality and high household indebtedness are directly related to the pandemic-stricken economic climate and its impact on the labour market, thus impacting on disposable income and the ability of borrowers to service their debt. The bank continues to scrutinise and monitor asset quality of banking institutions., BoN pointed out.
The relief measures that were implemented at the onset of the Covid-19 pandemic by the Government, the Bank of Namibia and Namibia Financial Institutions Supervisory Authority (NAMFISA) have cushioned the financial system against a potentially severe impact.
The National Payment System (NPS) remains stable, safe, efficient, and effective. The committee is of the view that there is no need for further macroprudential policy interventions at this stage, however, the central bank remains steadfast and will take remedial macroprudential action if and when necessary, BoN concluded.
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