This paper investigates the performance of South Africa’s commercial banking sector for the period 2005- 2009. Financial ratios are employed to measure the profitability, liquidity and credit quality performance of five large South African based commercial banks. The study found that overall bank performance increased considerably in the first two years of the analysis. A significant change in trend is noticed at the onset of the global financial crisis in 2007, reaching its peak during 2008-2009. This resulted in falling profitability, low liquidity and deteriorating credit quality in the South African Banking sector.

/pdf/a-financial-ratio-analysis-of-commercial-bank-performance-in-43z9cufw5y.pdf

A financial ratio analysis of commercial bank performance in South Africa

This study draws lessons from recent South African financial history. The period covers the 2002/3 small bank crisis, the 2008 global financial crisis and the collapse of African Bank in 2014. During the small bank crisis, twelve banks experienced runs and a further ten deregistered. In chapter 2, I use a monthly bank-level data set to show that the failing banks were all solvent, but that their funding structure made them fragile and susceptible to a confidence shock. The central bank did not intervene to provide liquidity to the affected banks, worsening the crisis. The lessons are that bank failures can impose both shortand long-term economic costs, monetary policy can have financial stability implications, and that a credible and clear bank resolution strategy is critical. South Africa did not experience any bank failures during the 2008 global financial crisis period. In chapter 3, I show that this is partly because the banking regulator increased capital adequacy ratios during the pre-crisis period, in response to rapid credit growth. The lesson is that macroprudential tools can reduce credit growth and dampen overheating financial cycles. In chapter 4, the successful bail-in of creditors in African Bank during 2014 provides lessons on the intended and unintended consequences of post-global financial crisis bank resolution tools. Money-market funds ‘broke the buck’, triggering significant redemptions and some financial spillovers. The authorities required discretionary liquidity restrictions and market-making facilities. The lesson is that – correctly applied – new resolution tools can support the sustainable restructuring of a failing bank, reduce financial spillovers, and minimise taxpayers losses. The conclusion points to broader lessons from the whole period, particularly the primary importance of a coordinated monetary and financial stability policy framework. iii Stellenbosch University https://scholar.sun.ac.za

Lessons from South African bank failures 2002 to 2014

We evaluate South African financial stability policy from 2003 to 2013 – the country’s most significant credit boom and bust cycle. This cycle overlapped with both rising bank capital adequacy rati...

South Africa’s 2003–2013 credit boom and bust: Lessons for macroprudential policy

The manner in which financial ratios are distributed overtime in business organizations is often regarded as very useful indicators of the growth, performance, and financial status of the business.  However, this paper attempts to reinforce this claim by using the normal distribution statistical model to analyse the structure of financial ratios.  It adopts the case study approach to provide an in-depth analysis of the normality of the financial ratios of Vitafoam Plc.  The secondary data generated from the company’s annual report and accounts were tested for normality using method of moment. It was found that financial ratios were normally distributed. On the basis of our study findings, we conclude, that financial ratios are reliable business status indicators. We therefore recommend the application of financial ratios in the evaluation of business performance, growth and financial status. KEY WORDS : Financial Ratios, Normal Distribution, Business Status Indicators

/pdf/the-normal-distribution-of-financial-accounting-ratios-as-3y8363ddo5.pdf

The Normal Distribution of Financial Accounting Ratios as Indicators of Business Status

Financialisation in South Africa : examining the financial conduct of non-financial enterprises, banks and households

The international financial crisis that emerged in 2007 and hit with full force in 2008 had its roots in the banking sector and specifically in the management of risks associated with securitised mortgages. While there were many causes for the crisis, the failure of prudential regulation is amongst the most important, and the severity of the subsequent crisis has underlined the role of prudential regulation in a modern financial system.

Prudential regulation, its international background and the performance of the banks a critical review of the South African environment since 1970

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Prudential regulation, its international background and the performance of the banks a critical review of the South African environment since 1970