Capitec exceeds reserves requirements

File photo: Candice Chaplin.

File photo: Candice Chaplin.

Published Jul 3, 2015

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Johannesburg - Capitec Bank disclosed on Friday that its capital adequacy reserves ratio exceeded the regulatory requirement threefold. This was in preparation for stringent capital adequacy requirements under Basel III which will be phased in from 2017 and was partly informed by the 2008 financial crisis.

In the quarter to the end of May, the company said its common equity tier 1 capital stood at R11.2 billion, just up from R10,6 billion at its financial year end in February.

This is the most basic form of capital reserves. The company’s additional Tier 1 Capital stood at R181 million and this gives the company total Tier 1 capital of R11.4 billion and a capital adequacy ratio of 30,6%. This was up from R10.8 billion and a ratio of 29,9% in February.

The company’s total subordinated debt stood at R1.7 billion while its unidentified loan impairments, which covers loans that are to be written off, stood at R414 million at the end of May to yield Tier 2 capital of R2.1 billion and a ratio of 5.6%. Tier 2 capital is capital that is committed t other debts and is thus risky.

The company’s total qualifying regulatory capital, made up of Tier 1 and Tier 2 capital, currently stands at R13.6 billion, or a ratio of 36,2%. This is more than three times the regulatory requirement of 10% under Basell III, made up of 8% required by Basel III and South Africa’s country’s specific buffer of 2%. To comply with Basel, Capitec need only hold R3,7 billion, instead of R13.6 billion.

Capitec has high quality liquid assets of R5.8 billion. This is cash or assets that can be converted to cash with ease. This gives Capitec a Liquidity coverage ratio of 897%, when the required minimum is 60%.

In Its Financial Stability Review for the first quarter of this year, the South African Reserve Bank stated that South African banks are well capitalised and sound. Their adequacy reserve ratio during the second half of last year was found to to 14,47%, above the required ratio of 10%.

ANA

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