NBFIs to absorb market risk

Non-banking financial institutions in Namibia are expected to absorb market risks associated with the Covid-19 pandemic, given their high demand for capital as it is mandatory.

14 May 2020 | Business

Overall risk associated with the Covid-19 pandemic to financial stability in Namibia may be more severe than projected given the growing uncertainty. - BoN

Phillepus Uusiku



All risks to financial stability in Namibia emanated from the banking sector, payment and settlement system, as well as the non-banking financial institutions (NBFIs) sector, which increased in 2019, when compared to 2018 ,and was further worsened by the outbreak of Covid-19 earlier this year.

Going forward, the impact of the Covid-19 pandemic on the global and domestic economy, as well as financial stability will be a key factor, the Bank of Namibia (BoN) says in its recent Financial Stability Report.

The NBFIs are however expected to absorb this risk, given their high demand for capital as it is mandatory.

It should be cautioned, however, that the overall risk associated with the Covid-19 pandemic to financial stability in Namibia may be more severe than projected, given the growing uncertainty, the BoN warned.



Assets

Despite the worsening economic conditions, the NBFIs sector remained stable and continued to grow its assets.

The NBFIs total assets increased significantly by 9% to N$316.3 billion in 2019. The growth in assets was due to the improved performance in equity markets, particularly during the fourth quarter of 2019, the BoN says in their analysis.

According to the BoN, going forward, however, the performance of the NBFIs might be adversely affected by the ­outbreak of the Covid-19 pandemic. The long-term effects of the Covid-19 pandemic upon the global economy remain difficult to predict, due to ever-changing conditions, but in the short-term global economic growth is expected to severely decline.

The severe losses on the global financial markets are expected to also adversely affect the NBFIs asset position with possible negative ripple effects to the banking sector through the wholesale funding channel, if the current conditions persist, the BoN emphasised.



Insurance

Insurance industries globally are likely to be adversely affected by Covid-19, depending on the specific classes of business underwritten by an insurer as well as the implications of the policies implemented.

The impact on insurance claims depends on the country, but could be incurred through claim costs, including death and disability claims as well as medical expenses.

The reaction of investors to the Covid-19 outbreak negatively affected movements in the ­financial markets, including bond prices and equity markets which will consequently result in reducing profitability of ­insurers, the central bank says.



Pension funds

Despite the persistent recessionary economic conditions, the pension fund industry remained financially sound during 2019, with funding levels above the prudential required limit of 100%.

The pension fund assets grew by 9.4% to N$173.4 billion, supported by positive performance in the financial markets during 2019. The industry accounted for 54.8% of total NBFIs assets at the end of 2019, the BoN pointed out.

Going forward, Covid-19 might lead to lower funding levels for the pension fund industry, if the prevailing downturn in financial market performance persists. Increased pressure will be on the pension funds, given that the industry funding levels were only slightly above the prudential limits, the BoN says.

There are high possibilities of retrenchments and unpaid leave of employees in some industries of the Namibian economy.

Nonetheless, the Namibia Financial Institutions Supervisory Authority (Namfisa) has started to engage the pension industry to ensure that pension fund funding levels remain above the prudential limits, the BoN added.

Similar News

 

2020 Mining Expo and Conference cancelled

18 hours ago | Business

Phillepus Uusiku The Mining Expo and Conference that was scheduled for 2-3 September 2020, after having been postponed from 22-23 April, has been cancelled. The...

NBL ready to deliver

18 hours ago | Business

Phillepus UusikuLife is slowing returning to normal as Namibians navigate the country’s gradual reopening following an easing of trade restrictions which were necessitated to combat...

Shanghai copper hits 3-month high

18 hours ago | Business

Shanghai copper prices rose to their highest in nearly three months on Tuesday, as demand in top metals consumer China continued to recover, though gains...

Company news in brief

18 hours ago | Business

Aeroflot losses widen as traffic slumpsRussian airline Aeroflot on Tuesday reported its first-quarter net loss widened to 22.48 billion roubles (US$326.2 million) after traffic...

Company News In Breif

1 day - 02 June 2020 | Business

London Metal Exchange cancels events The London Metal Exchange (LME) said on Monday it cancelled all of its events during the LME Week in London...

De Beers to shift diamond viewings from Botswana

2 days ago - 01 June 2020 | Business

Brian Benza - Global diamond giant, De Beers is working with Botswana's government to temporarily move viewings to places closer to international diamond centres, with...

Alrosa expects big drop in May sales

2 days ago - 01 June 2020 | Business

Polina Devitt - Russian diamond producer Alrosa expects its sales for May to total tens of million US dollars, down sharply from May 2019 but...

MTC most admired brand in Nam

2 days ago - 01 June 2020 | Business

Phillepus Uusiku - Massive investment, consistency, accessibility and giving clients an exceptional experience are some of the most important tools in transforming a product or...

The struggles of a small airline during coronavirus

2 days ago - 01 June 2020 | Business

Anne-Sophie Faivre le Cadre - Launching an airline in Africa is a notorious challenge in a continent and sector where opportunities are often crimped by...

Company news in brief

2 days ago - 01 June 2020 | Business

BAT SA to file lawsuitA raft of South African tobacco companies, activists and associations are seeking legal action over the ban on cigarette sales during...

Latest News

Sean K part of Covid-19...

4 hours ago | Art and Entertainment

WINDHOEK EXPRESSWINDHOEKNamibian crooner Sean K is one of 11 African artists who worked on a collaborative song to thank healthcare workers for their commitment and...

2020 Mining Expo and Conference...

18 hours ago | Business

Phillepus Uusiku The Mining Expo and Conference that was scheduled for 2-3 September 2020, after having been postponed from 22-23 April, has been cancelled. The...

NBL ready to deliver

18 hours ago | Business

Phillepus UusikuLife is slowing returning to normal as Namibians navigate the country’s gradual reopening following an easing of trade restrictions which were necessitated to combat...

Treasury demands reports of lockdown...

18 hours ago | Economics

OGONE TLHAGEWINDHOEKThe ministry of finance will demand full reports from public entities, ministries, agencies and offices detailing procurement expenditure incurred during stage one of the...

Over 120 lose jobs at...

18 hours ago | Labour

KENYA KAMBOWERUNDUAbout 120 people lost their jobs yesterday after a fallout between Chinese-born business magnate Stina Wu and a subcontractor that labour inspectors found to...

Namibia’s food security paradox

18 hours ago | Agriculture

Venomukona Tjiseua, sustainable agriculturalist: “The government must revisit its priority list and place agriculture at its correct spot.”With jobs disappearing, incomes drying up and savings...

The contest for hearts and...

18 hours ago | Opinion

Nightfall does not come all at once, neither does oppression. In both instances, there is a twilight, when everything remains seemingly unchanged.The above quote by...

Indemnity forms a matter of...

18 hours ago | Education

OGONE TLHAGEWINDHOEKWith some learners expected to return to schools today, education ministry executive director Sanet Steenkamp says parents will have to trust that schools have...

SA loosens lockdown to revive...

18 hours ago | International

South Africa sought to revive its stuttering economy on Monday with a partial lifting of its coronavirus lockdown, letting people out for work, worship or...

Load More