The reverberations from last week’s collapse of South Africa’s African Bank continue with Moody’s Rating Agency downgrading all four major banks in the country.
It warned that further downgrades to Standard Bank, FirstRand, Absa and Nedbank were possible because of weak local economic conditions.
The rand fell to its weakest in a week on Wednesday with the currency experiencing four days of daily losses.
Moody’s, which also cut Capitec Bank’s credit rating last week, said the Reserve Bank had not fully protected African Bank’s creditors, raising questions about the quality of future support for other banks should they need it.
It noted that the likelihood of systemic support being provided in the event of need for these banks, to fully protect senior creditors and depositors, is now materially lower than previously thought.
African Bank had mainly provided small loans to low-earning black South Africans, helping them start businesses or get into the housing market.
It was placed under curatorship on 10 Aug. after it said it would need to raise US$850 million to bolster its balance sheet and expected to report a US$650 million loss, causing its share price to nose-dive and the Reserve Bank to step in.
