JOHANNESBURG - Measures taken by South Africa’s leading retail - TopicsExpress



          

JOHANNESBURG - Measures taken by South Africa’s leading retail banks to tighten lending criteria and slow down growth in unsecured lending may not be enough if tough economic conditions continue, a new index warns. Speaking at the release of the Boston Consulting Group’s (BCG) Retail Banking Performance Index for South Africa, Michael Seeberg, principal at BCG, said banks will probably have to take further steps if the muted economic environment persists, especially since trends in consumer lending books is a lead indicator of what might change in the credit quality of other asset classes like mortgage and vehicle finance. The South African Reserve Bank placed African Bank under curatorship in August after the unsecured lender said it needed billions more in capital and its share price collapsed. The bank’s demise has raised questions about the health and sustainability of unsecured lending and the implications for retail banking in South Africa. Seeberg said it is important for banks to ensure that risk management practices are adequate to manage loan books and that they can provide early warnings. They should be in a position to identify trends in their books and have good collection processes in place. At a more granular level, banks also have to be conscious of where they do business, how the market is evolving and whom they lend money to, he said. Dr Klaus Kessler, senior partner and managing director at BCG, said the next big thing is the industrialisation of risk management, something he believes is also on the cards for South African banks. The European Central Bank (ECB) is requiring European banks to not only look at risk and risk management from an operational perspective, but to add a strategic dimension. This means every bank is requested to come up with a five-year risk strategy plan that defines its risk appetite over the next five years, he said. European banks are also required to report how they plan to match the increasing risk with a set of capabilities that include tools, people and structures. Kessler said he is pretty sure that this approach will be globalised fairly soon which means it would also be applicable to South African banks. Seeberg said the Regulator has been very prudent in the past. Since South Africa is a G20 country that is interested in foreign direct investment, a stable banking sector is an element of key interest for the Reserve Bank. But despite the woes of unsecured lending, Seeberg still believes retail banking in South African is a profitable sector that is well-capitalised. Kessler said that in general African banks are managing the risk on their books pretty well and in a much more proactive way than Greek banks did in the lead-up to the financial crisis. Topics: BOSTON CONSULTING GROUP, BANKING PERFORMANCE INDEX, RETAIL, UNSECURED LENDING, SOUTH AFRICA, AFRICAN BANK, CREDIT, INTEREST, GREEK BANKS 0 inShare PRINT ARTICLE SEND TO FRIEND Rate this article 0 0 JOURNO PROFILE NAME: Ingé Lamprecht BIO: Ingé Lamprecht has been a financial journalist for a number of years, after working in finance for a short while. She specialises in writing about investments, tax and the automotive industry. She... EMAIL: [email protected]
Posted on: Thu, 09 Oct 2014 04:27:49 +0000

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