Banks resilient to shocks—BoT

Banks have continued to improve their ability to withstand adverse economical shocks and are collectively in a much stronger capital position.

The Bank of Tanzania (BoT) says in a recently report that the stress test results for the year ended December 2012, indicates that the banking sector was ‘generally resilient to applied shocks.

The report conducted by the Directorate of Banking Supervision, covers credit, foreign exchange, interest rate and liquidity risks. It involved top ten banks which account for about 75 per cent of total assets of the sector.

“The Stress Test Results indicate that the sector is generally resilient to applied shocks and there will be no significant impact to the sector should the applied shocks materialize,” reads part of the report.

BoT’s Director Banking Supervision, Mr Agapiti Kobelo said the directorate will continue to ensure safety, soundness and stability of the banking sector to facilitate smooth implementation of the monetary policy.

“This will go in tandem with enhanced surveillance of developments in domestic banking system as well as in the international arena,” Mr Kobelo said in the report.

The report shows that the banking sector’s liquidity position declined slightly in 2012 as reflected by ratio of liquid assets to demand liabilities (Liquidity Ratio) which stood at 38.34 per cent compared to 40.10 per cent recorded in 2011.

Despite the decline, “the ratio was above the minimum regulatory limit of 20 per cent,” the report indicates. Furthermore, the ratio of gross loans to total deposits (Lending Ratio) increased to 68.72 per cent in 2012 from 64.34 per cent in previous year.

The ratio was within the maximum regulatory limit of 80 per cent. The banking sector showed improved performance during 2012 as reflected by Financial Soundness Indicators (FSIs) which cover capital adequacy, asset quality, earnings, liquidity and sensitivity to market risk.

The banking sector, according to BoT, remained adequately capitalized during 2012. The ratios were above the required minimum legal capital adequacy ratios of 10 per cent and 12 per cent, respectively.

The stress test when conducted, the banking sector was composed of 50 banking institutions consisting of 32 commercial banks, 12 community banks, 5 financial institutions and one deposit taking microfinance company. Today there are 51 banks.
Source: Daily News, reported by Abduel Elinaza from Dar es Salaam, Tanzania
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