Central bank set to limit individual debt
The new regulation will see the central bank setting up a debt serving to income ratio that limits people from going beyond a certain amount given their income.
Ndama Nakashole - The central bank said it wants to put in place a regulation that limits the amount of loan someone can take out, given their income.
Central bank Governor Ipumbu Shiimi at the launch of the 2018 Financial Stability Report on Friday said the bank is worried about the high level of debt and an increase in non-performing loans in 2017.
The year 2017 saw non-performing loans (NPLs) increase from N$1.3 billion to N$2.3 billion. This represents an increase of 76.9%, and outstrips the increase of 7.7% in total loans and advances.
According to the central bank governor, the new regulation, which has not been approved yet, will see the central bank setting up a debt serving to income ratio that limits people from going beyond a certain amount given their income.
Shiimi said debt in the economy remains a risk within the financial markets and limiting individuals from going beyond a certain limit, the central bank is also putting ease at banking institutions as they will not be under much pressure of NPLs.
“It actually says you can’t go beyond this. Because you cannot spend all your income in servicing debt. You have food to buy, you may have school fees to pay for and other things,” he said, adding that the rule will look more at setting limits to decrease the possibility of default.
Shiimi said this new measure is an addition to the 10% deposit requirement that was put up in place in 2016, all to manage debt.
In 2016, the central bank put up a new regulation that requires a 10% deposit by clients before any new purchase loan in approved.
Shiimi said at the moment, they are not thinking of any other measures apart from the one in the pipeline, but they will keep monitoring the credit risk and act as needed, at any specific periods.
Sound
Apart from the credit risk, Shiimi said the Namibian financial system, which is made up of banks, non-bank financial institutions and the payments system continued to be financially sound, safe and resilient with no disorderly functioning of financial markets of infrastructure.
“Non-banking financial institutions (NBFIs) remained financially stable and sound and continued to grow assets, despite domestic economic conditions,” said Shiimi, who co-launched the report with Namibia Financial Institutions Supervisory Authority (NAMFISA).
Details
According to the report, the NBFI asset base grew by 18% in 2017, driven mainly by the general increase in investment income due to upbeat financial markets and thus improved market returns. Going forward however, the concentration risk within NBFIs needs to be monitored, it says.
The payments system and infrastructure continued to perform efficiently and effectively in 2017 with robust risk-mitigating measures in place to facilitate safe payments.
During the same period, most risks to the country’s financial system have either remained low or unchanged with minimal potential impact to the financial system.
Central bank Governor Ipumbu Shiimi at the launch of the 2018 Financial Stability Report on Friday said the bank is worried about the high level of debt and an increase in non-performing loans in 2017.
The year 2017 saw non-performing loans (NPLs) increase from N$1.3 billion to N$2.3 billion. This represents an increase of 76.9%, and outstrips the increase of 7.7% in total loans and advances.
According to the central bank governor, the new regulation, which has not been approved yet, will see the central bank setting up a debt serving to income ratio that limits people from going beyond a certain amount given their income.
Shiimi said debt in the economy remains a risk within the financial markets and limiting individuals from going beyond a certain limit, the central bank is also putting ease at banking institutions as they will not be under much pressure of NPLs.
“It actually says you can’t go beyond this. Because you cannot spend all your income in servicing debt. You have food to buy, you may have school fees to pay for and other things,” he said, adding that the rule will look more at setting limits to decrease the possibility of default.
Shiimi said this new measure is an addition to the 10% deposit requirement that was put up in place in 2016, all to manage debt.
In 2016, the central bank put up a new regulation that requires a 10% deposit by clients before any new purchase loan in approved.
Shiimi said at the moment, they are not thinking of any other measures apart from the one in the pipeline, but they will keep monitoring the credit risk and act as needed, at any specific periods.
Sound
Apart from the credit risk, Shiimi said the Namibian financial system, which is made up of banks, non-bank financial institutions and the payments system continued to be financially sound, safe and resilient with no disorderly functioning of financial markets of infrastructure.
“Non-banking financial institutions (NBFIs) remained financially stable and sound and continued to grow assets, despite domestic economic conditions,” said Shiimi, who co-launched the report with Namibia Financial Institutions Supervisory Authority (NAMFISA).
Details
According to the report, the NBFI asset base grew by 18% in 2017, driven mainly by the general increase in investment income due to upbeat financial markets and thus improved market returns. Going forward however, the concentration risk within NBFIs needs to be monitored, it says.
The payments system and infrastructure continued to perform efficiently and effectively in 2017 with robust risk-mitigating measures in place to facilitate safe payments.
During the same period, most risks to the country’s financial system have either remained low or unchanged with minimal potential impact to the financial system.
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