How Stable Are SA Banks?
With the recent scandal at VBS Mutual Bank consumers have once again been reminded that banks can fail and collapse overnight.
Recent history in SA banking has taught consumers that banks are not as stable as they appear and that things can be deceiving. Good advertising and expensive offices do not make a bank secure. In the past, consumers have seen among others; Saambou, African Bank and very recently VBS Mutual Bank fold overnight.
‘banks can fail and collapse overnight’
In the case of VBS, the cause was the looting of billions of Rand by employees of the bank. African Bank fell when the real profit/loss figures came to light in the wake of reckless lending accusations and the jumping ship of upper management (who cashed out and made a run for it before the bank collapsed). [Read More About That Here]
Credit Rating agency Moodys regularly report on how ‘stable’ banks are. They recently had a look at SA banks (the top 7 local commercial banks).
Though the local banks are still rated as below investment grade, Moodys have now upgraded their outlook (where they see things going) from negative to stable. This is seen as a positive indicator that experts feel that these banks are not going to collapse. Recent SA legislation has been designed to help protect both consumers and banks themselves by preventing the banks from giving credit to consumers who cannot afford to repay that credit. This includes making the banks check on consumers income, other debts and monthly expenses.
Other processes have also been put in place to help the banks recover funds from financially strained consumers such as debt review. A new process that may become available to the unemployed who have debt is called debt intervention. This process also allows consumers to pay very little on debts each month or possibly even allows debts to be written off if they remain unemployed for many years.
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