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< Blog 6May_2016
Blog 10May_2016 >

South African banking Institutions Liabilities jump for Credit Derivative Instruments

Category: Banking and financial markets
Date: 7 May 2016 

Related Topics

While paging through the latest Quarterly Bulletin from the South African Reserve Bank, we spotted something that looked more than a little peculiar. There is a massive spike under Banking Institutions contingent liabilities for Credit Derivative Instruments. The graphic below shows the jump that we are referring to. It would be interesting to hear the South African Reserve Bank's view on this, and whether they are concerned about this sharp and sudden increase in the use of gearing. Since part of their mandate is financial stability, they need to keep a close eye on this, as a near doubling of banking institutions contingent liabilities in one month on credit derivative instruments does not bode well for South Africa's financial stability,

​The period when the spike took place is when futures contracts etc are rolled over, so end of September 2015 contracts are rolled over to end December 2015 contracts (and this might be reflected in October 2015 onward). While this might explain part of the spike, some entity(ies) had to take up large scale positions in order to see this massive spike in banking institutions liabilities for credit derivative instruments. Question is who and on what were these positions taken out?
 

  • South Africa's Economic Scorecard
  • South Africa's GDP animation
  • Economics Main Page
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  • PSG Group
  • Standard Bank
  • Nedbank
  • FirstRand

chart created with amCharts | amCharts
We hope this massive spike from R43,5billion to R83,4billion in liabilities for banking institutions from credit derivative instruments is caused by a technicality (such as additional instruments being included in this calculation that was not previously part of it), because if this is not the case, and the borrower(s) defaults on their positions, we might very well see another African Bank or Global Trader really soon? Lets hope someone from the Reserve Bank reads this and provides clarity on what exactly is going on here.

Related Topics

  • South Africa's Economic Scorecard
  • South Africa's GDP animation
  • Economics Main Page
  • Capitec
  • PSG Group
  • Standard Bank
  • Nedbank
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