Moody’s warns South African banks over sovereign bonds

Moody's ratings agency on Wednesday warned South Africa's banks that weak economic growth in tandem with their exposure to government securities poses a risk of serious trouble ahead.

Describing the operating environment for South Africa's banks as “challenging”, Moody's forecast modest economic growth of three percent next year.

That, the agency said, was below the pace needed to kick-start manufacturing, “tackle high unemployment and substantially improve living standards,” putting a dampener on banks' business and eroding the quality of assets.

Moody's warned that banks were over-exposed to government securities, which were recently downgraded and which make up more than 150 percent of capital at the largest banks.

Downgrading the outlook for the banking system to “negative” Moody's also warned that banks were over reliant on deposits from other institutions to maintain liquidity. AFP