South Africa’s banking regulator plans to give banks a break from accounting and capital rules that could release around 300 billion rand ($17 billion) for lending to help the economy cope with the fallout of the coronavirus.
“It’s quite big, it’s quite meaningful,” said Kuben Naidoo, deputy governor of the South African Reserve Bank and chief executive officer of the Prudential Authority, in an interview. “We will need to evaluate in one or two months whether this is enough.”
The regulator joins other banking authorities around the world that have relaxed rules to keep credit flowing to counter the economic havoc caused by the pandemic. South Africa’s proposals include dropping minimum capital requirements and compulsory reserve funds for lenders, reducing the liquidity coverage ratio to 80% from 100% and relaxing accounting standards when determining potential losses.
While South African banks have been criticised by labour unions and small business owners for not doing enough to help struggling customers as the nation entered a 21-day lockdown, they have to comply with requirements set by the regulator. They were also prevented from hammering out a coordinated response until antitrust authorities allowed the lenders to discuss the issue with each other.
“It’s to facilitate the banks to provide these short-term holidays,” he said. “We’ve have had informal consultations with banks and they are prepared to extend payment holidays to certain categories of customers.”