The South African Reserve Bank has published the second edition of its 2025 Financial Stability Review, concluding that the South African financial system remained resilient and that systemic risk indicators were at relatively benign levels, with resilience expected to be maintained through the forecast period to November 2026. The review notes easing domestic financial conditions alongside a rebound in local asset markets, but continues to flag vulnerabilities linked to public debt and pressures on households and small and medium-sized enterprises. Domestic equities recovered after April 2025 turmoil, with the JSE All-Share Index reaching an all-time high by October 2025, while government bond yields fell to six-year lows, supported by an improved fiscal outlook and positive market catalysts including South Africa’s removal from the Financial Action Task Force greylist and Standard and Poor’s Global Ratings’ sovereign upgrade on 14 November 2025. Public sector debt remained elevated at 78.1% of GDP as of June 2025. Banking sector return on equity stayed above its 10-year average and capital adequacy ratios remained robust; corporate credit growth strengthened while household borrowing stayed subdued and debt-service burdens eased slightly but remained above long-run averages. The Financial Conditions Index realigned with its long-term average in June 2025, and the credit-to-GDP gap turned marginally positive at 0.81%, still well below the 2-percentage-point benchmark used as a risk-level guide for countercyclical capital buffer activation. Key threats were grouped into cyclical risks (including rapid capital outflows, deteriorating public debt ratios, and household and SME distress), structural and perpetual risks (including geopolitical tension, low and inequitable growth, deteriorating infrastructure and climate impacts, plus new risks on financial system concentration and technology-enabled financial innovation), and operational and event risks (including systemic operational disruption such as cyber incidents, with digital banking fraud losses rising to ZAR1.888 billion in 2024). On next steps, the review notes ongoing work on a positive cycle-neutral countercyclical capital buffer and continued crisis preparedness, including further simulation exercises planned for 2026. It also states that the SARB is working with National Treasury on a framework for overseeing cross-border crypto-asset transactions and on updating the Exchange Control Regulations, and points to South Africa’s next Financial Action Task Force mutual evaluation cycle starting in 2026.

Original source View in tracker