SA banks well capitalised, says Reserve Bank

South African banks are sound and well capitalised, the Reserve Bank has said in response to Moody's downgrading of five banks.

On Wednesday, Moody's Investors Service downgraded by one notch the senior debt and deposit ratings of five South African banks namely: Standard Bank of South Africa, Absa Bank Limited, FirstRand Bank Limited, Nedbank Limited, and Investec Bank Ltd.

The downgrades are part of the rating agency's global assessment of the systemic support levels incorporated in banks' deposit and debt ratings.

"The South African Reserve Bank (SARB) remains of the view that the South African banks are sound, well capitalised, profitable and providing investors with acceptable returns. The five banks weathered the global financial crisis well, have no exposures to the Sovereign debt crisis of certain troubled European countries and remain largely focussed on the Rand based South African economy," said the central bank.

"Thus the likelihood of systemic support required by these banks in the immediate future is considered to be low," noted the bank.

According to Moody's, the rating action is not driven by deterioration in the standalone financial strength or the financial performance of the banks and that it concludes the rating agency's review for downgrade of the banks initiated on 10 November 2011. 

Additionally, Moody's downgraded by one notch the subordinated debt instruments of the same banks mentioned, in addition to African Bank Limited's EMTN subordinated debt programme ratings. 

The downgrades reflect the removal of systemic support assumptions from the subordinated debt instruments of South African banks, prompted by Moody's expectation that authorities will likely make greater use of their resolution tools to allow burden sharing with subordinated bondholders. - BuaNews