Reserve Bank Warning: Basel 3 Could Hurt SA Growth

Daniel Mminele, deputy governor of the Reserve Bank, stated last week that the implementation of the Basel 3 liquidity requirements could hurt job creation and South African economic growth.

In a speech published on the Bank’s website, Mr Mminele said that these new requirements could result in South African banks reducing their lending which would have negative consequences for both economic growth and employment creation.

At a forum held in Cape Town, he stated that the problem in South Africa is that the banks rely heavily on wholesale funding rather than retail deposits. This in turn increased the requirement in terms of the new liquidity coverage ratio (LCR) and the net stable funding ration.

The Reserve Bank has come forward and announced that it would help the banks meet the LCR by making a committed liquidity facility against eligible collateral available to avoid any abrupt changes to the banks business models. Any such abrupt changes could have a detrimental effect on the economy.

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