Liquidity pool created for South African banks

May 17, 2012

Moody's has welcomed the creation of a liquidity pool for South African banks.

Moody's has welcomed the creation of a liquidity pool for South African banks.

The resource will provide financial institutions with a way of meeting the new worldwide Basel III regulatory requirements and mean a credit downgrade may be unnecessary.

Moody's Senior Analyst Nondas Nicolaides told Reuters: "I wouldn't say it will change the outlook but it diminishes the risks of possible pressure on the ratings because of the liquidity requirements coming in."

Called the Committed Liquidity Facility, the initiative could help the nation's banks that are currently suffering from a lack of cash to cover outflows in a stress scenario.

Earlier this year, Moody's downgraded the ratings of five South African banks - Standard, FirstRand, Absa, Nedbank and Investec.

However, analysts say the country's financial institutions are well capitalised and unlikely to need systematic support.

The Basel III rules will mean that banks are required to hold enough capital to survive any market downturns without causing harm to a country's financial system.ADNFCR-2976-ID-801365595-ADNFCR