Small businesses and households continue to be under significant financial strain, with above-average bad debt levels, but banks are holding significant bad debt provisions against this, mitigating the risk to financial stability, the Reserve Bank says.

The Bank identified “increased financial distress in households and SMMEs” as a new risk in its latest Financial Stability Review on Thursday, alongside other risks such as escalating global conflicts, deteriorating public sector debt ratios, capital outflows and critical infrastructure...

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