Carol Paton Writer at Large

Reserve Bank governor Lesetja Kganyago said on Wednesday that South African banks are capitalised well enough to withstand the shock in the event of a downgrade by Moody’s. Prior to the tabling of the budget, Kganyago said that the Bank stress-tested the financial system and was assured that a downgrade would not cause a banking crisis. “We have got conservative bankers who have planned for that scenario and are confident the banking system will be able to withstand it,” he said. Moody’s is the last of three ratings agencies to rate SA’s debt as investment grade. Should this change on March 29 when Moody’s is due to issue updated ratings, SA will fall out of the Citi World Global Bond Index (WGBI), with the result that an estimated $10bn invested in the government and state-owned companies would immediately flow out of the country. Key to the Moody’s decision will be whether financial support for Eskom is deemed to be both adequate to reduce the risk of an Eskom default and is accom...

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