Bank of Botswana’s Banking Supervision Annual Report for 2011 says that last year’s strike by unionised civil servants did not have an adverse impact on the financial condition of Botswana’s commercial banks.
“While there were initial concerns that the civil servants’ industrial action could have an adverse impact on the financial condition and performance of banks, in the end, the financial soundness indicator for banks were largely unaffected. Nevertheless, two banks showed signs of a build-up of asset quality problems evident in creeping non-performing loans,” the report says.
The report concludes that although the global economic recovery remained weak and domestic fiscal consolidation continued, 2011 – while not as good as 2010 – yielded satisfactory results year for the banking sector.
“All banks were profitable, liquid, adequately capitalised and in compliance with the minimum prudential requirements. In an effort to encourage the market to actively seek bankable projects, the Bank reduced its [Bank of Botswana Certificate] offerings, a development which led to a significant decline in the average cost of deposits, and also an increase in the financial intermediation ratios of most banks,” the report says.
“It is hoped that the growth in loans and advances will be sustainable, supported by sound credit risk management and other prudential banking practices. Access to banking and other financial services improved, in part, due to the increased usage of mobile banking technology, which has facilitated access to banking services by the unbanked population”.
Similarly, the country’s banking sector continues to inspire the confidence of potential investors who, according to the report, made enquiries about bank licence application procedures during the period under review.
“The result is that one application for a banking licence was at an advanced stage at year-end,” adds.
While the report notes lapses on the part of banks, its audit on corporate governance practice generally turned out good results. Board members were found to have the necessary skills and experience to exercise effective oversight roles over the operations of banks as well as relevant qualifications ranging from accounting, law, economics and general business experience.
“Loans extended to directors in all the examined banks complied with the relevant sections of the Banking Act,” the report says.
In order to enhance supervisory effectiveness, BoB has revised its Banking Supervision Core Principles for Effective Banking Supervision, increasing their number from 25 to 29. This review has resulted in a total of 36 new assessment criteria, comprising 31 new essential criteria and five new additional criteria.
On another note, BoB received abandoned funds from banks amounting to P0.6 million in 2011, compared to P1.6 million in 2010. The report says that a total of P0.4 million was transferred to the Guardian’s Fund in 2011, the amount being P0.3 million less than 2010’s.
“These are funds that were held by the Bank and remained unclaimed for a period of five years. The closing balance of abandoned funds remained at P9.8 million for 2011.”