Namibia banking sector and NBFI remain healthy: Uanguta

WINDHOEK: The Namibian banking sector and Non-Banking Financial Institutions (NBFI) remain healthy as they do not pose systemic risks to the country’s financial system.

Deputy Governor of Bank of Namibia (BoN) and Head of Financial Stability, Ebson Uanguta, said this during the launch of the ninth Financial Stability Report (FSR) in the capital on Monday.

BoN and the Namibia Financial Institutions Supervisory Authority (Namfisa) jointly released the report for the first time in the history of this document since 2007.

The report aims to assess the stability and resilience of the Namibian financial sector to internal and external shocks.

Uanguta said this report that includes not only the banking sector of the country but also the NBFI, deserves recognition.

“We have realised that we cannot talk about financial stability without covering non-banking institutions. We are not saying the report is complete, however. There might be data limitations but we will work to address them,” he said without mentioning the limitations.

Uanguta explained that the assets of the NBFI have grown at 19 per cent year-on-year and stand at N.dollars 158 billion, adding that it is expected to grow in the next six months.

Since the last FSR in March 2014, the capitalisation of provident institutions was adequate to ensure solvency and funding levels are in excess of those required by statute.

“These are sufficient to withstand the shocks and risks to which these institutions are exposed,” he said.

Uanguta added that both household and corporate debts increased moderately and require continuous monitoring.

Household debt has increased by mortgages, overdrafts and instalment credit.

The ratio of household debt to disposable income rose to 83.9 per cent in December 2014 from 82.9 per cent in December 2013.

“This calls for comprehensive monitoring and targeted policy interventions to address growth in household indebtedness,” Uanguta said.

He argued that if household debt is left unchecked, growth in mortgages, instalment credit and overdrafts would lead to systemic risks in the financial system.

The corporate debt level, as share of the Gross Domestic Product (GDP), increased during the period under review (March 2014 – June 2015) due to growth in foreign private sector debt, coupled with the depreciation of the domestic exchange rate.

He stressed that the increase in corporate debt was, however, largely ascribed to borrowing companies, which earn foreign exchange and thus may not pose a major risk to the financial stability of the country, at least in the short-to-medium term.

The Deputy Governor noted that acceleration in the growth rate of large exposures in the banking sector, mainly to the mining, fishing and tourism sectors warrants monitoring to mitigate concentration risk.

Uanguta said the payment system infrastructure in Namibia continues to operate efficiently and effectively, adding that progress has been made to ensure that there is transparency in the way the National Payment System (NPS) operates and to reduce associated risks.

He said the overseers continued to participate in the analysis of critical incidents that may impact the stability of the NPS and recommended ways to prevent such incidents in the future.