4 things expected to hit South Africa’s financial stability in the next year – according to the Reserve Bank

The South African Reserve Bank (SARB) has released its second annual financial stability review.

One of the key focuses of the report is an analysis of some of the risks which could impact South Africa’s financial stability.

“The SARB regularly assesses the risks to financial stability in the next 12 months, with a view to identifying and mitigating any risks and/or vulnerabilities in the domestic financial system,” it said.

“Potential threats to financial stability are identified and rated according to the likelihood of their occurrence as well as their expected impact on the domestic financial system.

“The identified risks are classified as ‘high’, ‘medium’ or ‘low’ in terms of both the likelihood of each risk materialising and its possible impact on financial stability.”

Four specific risks were focused on by the Reserve Bank, including:

  • Weaker global economic growth
  • Faster than expected tightening of global financial conditions
  • Lower domestic economic growth
  • Cyber-security risks

Notably, the SARB said that there was a high likelihood of lower domestic growth, which could lead to a deteriorating fiscal position, rising debt levels and ratings downgrades triggering capital outflows.

It also highlighted that cyber-security risks could have a high impact on South Africa, with the possibility for corporate security breaches and a crash of crucial financial infrastructure.

Faster than expected tightening of global financial conditions is also expected to have a big impact on South Africa (should it occur), as it leads to a repricing of risk, an increase in capital outflows and possible exchange rate depreciation.

Table from SARB Risk assessment article

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