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Mozambique: Apex bank increases capital requirements for banks

18.04.2017

The Bank of Mozambique has increased the shared capital required for commercial banks from 70 million meticais (about US $1.05 million) to 1.7 billion meticais ($25.6 million dollars).

The Bank of Mozambique has increased the shared capital required for commercial banks from 70 million meticais (about US $1.05 million) to 1.7 billion meticais ($25.6 million dollars). Commercials banks have been given three years to increase their capital requirement to this level, which amounts to a 2,328 percent hike.

In a similar development, the apex bank also increased the minimum solvency ratio for commercial banks from 8 per cent to 12 per cent, giving the banks three years to attain this ratio. The regulator announced this development after the Monetary Policy Committee meeting earlier last Monday. Following the increase in capital requirements, the regulator also reduced one of its benchmark interest rates. The Standing Lending Facility (the interest rate paid by the commercial banks to the central bank for money borrowed on the Interbank Money Market) has been cut by 50 base points, from 23.25 per cent, to 22.75 per cent. The central bank governor, Rogerio Zandamela said the decision "is intended to strengthen the mechanism for forming interest rates in the economy, making it more transparent and in line with good international practices." 

Meanwhile, the Standing Deposit Facility (the rate paid by the central bank to the commercial banks on money they deposit with it) has been retained at 16.25 per cent. Also the Compulsory Reserves Coefficient was retained at 15.5 per cent.

However, Macroeconomic indicators point in the right direction as inflation has declined significantly. In March 2017, inflation stood at 0.88 per cent, compared with 1.25 per cent in February and 2.15 per cent in January respectively.