Ratings firm Moody’s says the South African Reserve Bank’s move to set up a dedicated unit to focus on financial technology is a good move – and is credit positive for the country’s banks. Moody’s currently holds all of South Africa’s retail banks at the same level as the sovereign – one notch above junk status, under review for downgrade.
However, in a research note published on Monday, the group was optimistic about the country – specifically on the back of positive sentiment around new president, Cyril Ramaphosa, and progress being made in the mining sector – highlighting some positive news for the banking sector as well. Last week, the SARB announced that it would be launching a special fintech unit, which will focus on assessing potential regulations in the cryptocurrency markets, investigating so-called innovation hubs, and experimenting with blockchain and distributed ledger technologies (DLTs).
According to Moody’s, the adoption of fintech infrastructure and regulations following these assessments – which are scheduled to conclude this year – will improve efficiency, strengthen anti-money laundering practices and increase South African technologies’ competitiveness globally. “These are credit-positive developments for banks that will decrease their transaction costs,” the firm said.
Of the three primary objectives outlined by the SARB, Moody’s sees the experimentation with distributed ledger technologies to be the most pioneering, as the adoption of these can improve efficiencies in back- and middle-office functions. “The cost-to-income ratio of South African banks is higher than that of peers elsewhere, with the improvements in the ratio in recent years also trailing peers.
Consequently, adoption of more efficient and less costly processes will help bridge the growing efficiency gap,” Moody’s said. “The SARB’s aim is to develop a proof of concept in collaboration with the banking industry to trial J.P. Read more from businesstech.co.za…
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