The Central Bank says the implementation of Basel 2 which kick-started January 2015 is bearing fruit within the market and has no teething troubles.
Presenting the Bank of Botswana financial report for 2015 recently, Deputy Governor Andrew Motsomi stated that BoB made adequate preparations in advance before implementing Basel 2. “What we did was that during the course of 2015, we did what is called a parallel run essentially getting the banks to submit returns under both Basel 1 framework and then the new Basel 2 framework,” said Motsomi.
According to Motsumi, BoB conducted several training workshops for members of staff and staff for commercial banks to allow for the smooth transition to Basel 2. He also confirmed that the bank undertook a capital assessment study on the banks to determine whether or not Basel 2 would not impact on capital levels of the banks and the levels of lending.
He said commercial banks were proactive, adding that those banks that required additional capital did so by either raising capital in the market or getting additional capital injection from their parent companies.
“The implementation has so far gone smoothly because adequate preparations have been made at both the industry level and from the regulatory perspective to ensure that the banks were prepared for this new protocol,” he said.
Asked on the benefits of the implementation of Basel 2, he responded by saying it reinforces resilience of the core capital of the banks, adding that banks should have the right type of capital in the structures in order for them to withstand challenges in their different balance sheets.
“We uplifted the 2 years moratorium fees on banks beginning of January 2016. We are much more stringent in terms of assessment and the extent to which we allow escalations. We are guarding that Banks do not do catch up on the past 2 years of running the moratorium by overly hiking their tariffs,” Motsomi stated.
Meanwhile the competitiveness of the Pula exchange rate maintained adjustment to an upward rate of crawl in 2016 due to gains in moderating domestic inflation.
Regarding economic developments in 2015, there were sluggish global economic activity and uncertain prospects. There was marginal improvement for major economies led by the USA, Eurozone and Japan although they expanded at slower rates.
“Emerging markets performance weighed down by slower growth for China. For Botswana, lower exports compared to imports; depreciation of the Pula against major international currencies; lower operating costs for the Bank,” BoB stated.