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South African Savings Initiative
Macro view of bank assets and liabilities
Round table discussion
Nkosana Mashiya
National Treasury
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Outline
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Macroeconomic successes
Financial Stability
Bank Stability
Liquidity
Capital Adequacy
Bank Assets and liabilities
Efficiency Ratios
Challenges
National Treasury initiatives on financial inclusion
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Macroeconomic successes


South Africa’s Macro Economic
Successes
Economic Growth
– Economy has proved fairly resilient to 2005
oil price shocks
– Growth rate is expected to average 4,9%
this year, rising to 5,2% in 2008 (NT
estimates)
– Financial sector growth:8,3%
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Financial Stability


Financial Stability
Stable
– investment environment
– exchange rates

Reserves
– Interest rates
– Growth in banking sector

Effective monetary policy
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Bank Stability

Banking Sector
• World Class banking system
• Compliant to international bank
standards (Baslle II)
• Sophisticated corporate governance
structures
• Internationally compliant riskmanagement systems
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Capital adequacy

Capital Adequacy
International benchmark: 8%
of RWA
• SA Benchmark:10% of RWA
• SA Banks voluntary capital
•
•
•
2003 – 12,2%
2004 – 13,5%
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Liquidity

Liquidity
• Statutory liquid assets requirement
(SLAR) is 20%
• Average daily amount of liquid assets
held by bank exceeds the SLAR
• Slight drop between 2003 and 2004,
but still above the SLAR
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Total Bank Assets & Liabilities

Total Bank Assets:
– R1 498bn (’04) (8% increase since ‘03)

Big 4 own 83,7%
– Domestic Deposits R910bn (60% of total
deposits)(Main source of funding)
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Total Bank Liabilities
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Composition of bank liabilities

Fixed & notice deposits decreased
by 3,8 % points during 2004.

Demand deposits as a percentage
of total non-bank deposits
decreased from 52 % to 47,1 %.
– Low interest environment
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Composition of bank liabilities

Negotiable certificates of deposit
(NCDs) as a percentage of non-deposits
increased significantly, from 3 % in
2003 to 12,1 % in 2004.
– (stamp duties on NCDs removed in 2004)
.
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Composition of bank
liabilities
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Short-term deposits
Short
term deposits = largest
component of total non-bank funding
(67,4 % of total non-bank funding at
31 December 2004)
73
% at the end of December 2003
and 69,6 per cent at the end of
December 2002.
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Medium-term deposits

Growth in medium-term deposits, decreased
from 10,6 per cent in January 2004 to 0,2 per
cent in June 2004.
– due to the deregistration of an A-2 rated bank.

By November 2004, growth in medium-term
deposits had increased to 54,3 %, before
moderating slightly to 47,4 per cent in
December 2004.
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Medium-term deposits

Medium-term deposits accounted for
22,9 % as at 31 December 2004,


18,7 % and 19,6 % at the end of 2003 and the
end of 2002, respectively.
Long-term deposits remained smallest
component of total non-bank funding

9,7 % of total non-bank funding at 2004,
compared to 8,3 % and 10,8 % at the end of
2003 and 2002, respectively.
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Long-term deposits

Growth in long-term deposits increased
markedly from March 2004 (see figure5).
– Increased by 40,9 % by the end of December
2004.

Attributed to the low interest-rate
environment since 2003.

Significant decrease in interest rates in 2003
resulted from a relaxation in South Africa’s
monetary policy during that year.
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Long-term deposits

From June 2003, repurchase rate was
reduced by 450 basis points.

Currently, big five banks hold more than
89,6 per cent of long-term deposits.
– Market Confidence
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Short to long term
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Other Major Liabilities

Other major liabilities:foreign funding
R45,8bn
– (increased by 18 % when compared to the
December 2003 level of R38,8 bn),
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Bank Assets

The banking sector's assets increased
by R118,3 billion (8,6 per cent) during
2004, to a total of R1 498,1 billion at
the end of December 2004.
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Growth in bank assets

Factors contributing to asset growth :
– Monetary assets grew by 12 %, from R28,8bn as
at 31 December 2003 to R32,3bn as at 31
December 2004.
– Non-bank advances grew by 15,8 %, from R876
bn at the end of December 2003 to R1 014,1 bn
at the end of December 2004.
– Loans granted under resale agreements decreased
by 37,2 per cent, from R46,4 bn at the end of
December 2003 to R29,2 bn at the end of
December 2004.
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Growth in bank assets
– Trading and investment assets grew by 0,9 %,
from R328,1bn at the end of December 2003 to
R330,9bn as at 31 December 2004.
– Non-financial assets decreased by 5,1%, from
R12,3bn at the end of December 2003 to R11,6bn
at the end of December 2004.
– Other assets decreased by 5,9 %, from R26,7bn
at the end of December 2003 to R25,1bn at the
end of December 2004.
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Composition of bank assets
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Aggregate Balance Sheet
structure
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Efficiency Ratios=Operating
expenses to total income
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Challenges

International standards
– Basle Capital Accord
– Anti-money laundering & terrorism financing

Broad-Based Black Economic Empowerment

Access to financial services
– Half of adult = no access to financial services
(Finscope)
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National Treasury Initiatives
on financial inclusion
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Cooperative Banks Bill
Dedicated Banks Bill
National Payment System reform
Deposit Insurance Scheme
Broader microfinance policy
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Summary

Stable and growing financial sector 8,3% (above national average)

High levels of financial exclusion

Financial Sector Reform
– Bank legislation
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THANK YOU!
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Key Findings financial diaries


Substantial financial portfolio managed
by low-income people
Enough budgeting power to save
– Cash flow analysis

Rapid growth in liquid financial assets
leads to increase in net worth
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Key Findings financial diaries

Growth in financial assets improves
financial status of low-income people

Missing – effective mechanism for
building sustainable financial assets
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Key Findings financial diaries

Smoothen spending patterns

Safety
– Risk of theft
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