Despite the ripple effects of the COVID-19 pandemic, the banking sector has weathered tough times, the Bank of Botswana’s 2020 Banking Supervision Report revealed.
The report notes that the sector has remained strong, profitable, sufficiently capitalized and liquid.
In addition, it is reported that no bank violated prudential or statutory limits during difficult times.
To demonstrate the resilience of the industry, the report says that overall, banks have yet to take advantage of the release of capital through a 2.5 percentage point reduction in the capital ratio. minimum prudential; all banks were operating well above 12.5%.
When the pandemic hit last year, the central bank decided to reduce the prudential capital adequacy ratio (CAR) from 15% to 12.5% for banks operating in Botswana.
In total, at the end of December last year, the banking sector had a capital buffer of 7.5%.
In addition, it is said that there has been no explicit use of the bank’s liquidity support measures, while the use of the government loan guarantee scheme has remained low.
Support measures, although less used, as well as transformation initiatives, continue to positively influence market confidence, prospects for stability and recovery, and hence economic and trade decisions, according to supervision.
On the negative side, it was noted that there is likely to be a deterioration in credit quality for most banks when regulatory forbearance measures are withdrawn and if the lifting of the state of emergency results in the dismantling of banks. companies currently operating at the margin.
While the banking sector has shown some resilience, the central bank expects the continuation of the pandemic to negatively affect the banking sector, including through deteriorating asset quality and profitability.
At the same time, the report further showed that employment levels in the banking sector declined between 2019 and 2020.
The number of people directly employed in the banking sector increased from 5,172 in 2019 to 5,142 in 2020.
Increased automation and the use of digital channels, as well as staff resignations and retirements (not replaced) are cited as the factors behind the decline in employment levels in the sector.