JOHANNESBURG - The SA Reserve Bank said yesterday that while the shadow banking system in South Africa remained relatively small when compared with global peers, its assets under management were growing at a faster pace than those of other banks.
The central bank said shadow banking entities or activities in South Africa comprised multi-asset funds, fixed-income funds, hedge funds, fund of funds, finance companies, activities of brokers, securitisation schemes and credit insurance.
The Reserve Bank said shadow-banking activities and their interconnectedness with financial intermediaries were raising important policy concerns.
“Shadow-banking activities amount to roughly 50% of gross domestic product in South Africa and could become a risk to the financial system if not properly measured
and understood. Currently, one of the biggest concerns is
data limitations,” the Reserve Bank said.
Globally, shadow banking is estimated to have reached more than $75 trillion (R955 trillion), and in South Africa it is estimated to be in excess of R2 trillion.
Another feature of shadow banking that has grown in stature in South Africa is stokvels.
According to research company African Response, stokvels are big business and there are 8.6 million people belonging to more than 421 000 stokvels in the country, with a collective value of R25 billion.
Perspective
The Reserve Bank said shadow banking played an important role in the economy.
“Non-bank financial intermediaries, and thus also shadow banks, play an important role in the financial system, not only from a regulatory but also from an economic perspective.
“There are several reasons why it’s important to be aware of the size and nature of the activities of these entities as well as their interconnectedness in the financial system.”
In terms of the National Credit Act, all entities that aimed to provide loans and advances to both individuals and legal persons were required to register with the National Credit Regulator (NCR) of South Africa.
There are more than 4 000 credit providers registered with the NCR.
These financial intermediaries profoundly influence the shape and size of the South African shadow-banking sector.
Statistics from the NCR show that total personal loans and advances grew from R1.21 trillion in the first quarter of 2011 to R1.32 trillion for the same period in 2012.
Of this R110 billion growth, R40bn can be attributed to pure unsecured credit and a further R15bn to credit facilities.
The Reserve Bank recognises 19 registered banks, with two commercial banks, Discovery and Tyme, expected to enter the fray next year.