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Archive - Archive 2004 - July 2013

Central Bank reiterates that DBS is financially sound |06 September 2011

Speaking at a press conference yesterday, CBS Governor Pierre Laporte said it is his duty to see to it that banks do not fall into bankruptcy. 

He said that the DBS has a Capital Ratio Adequacy of over 30%, well over the 12% required of all banking institutions.

Mr Laporte also denied a recent press report that the DBS had suffered a 26% default on loans. He said the correct figure was 9% and most banks have arrears of 4-5% on loans.

Since its setting up 30 years ago, DBS had depended mainly on foreign lending agencies, such as the French Caisse Centrale and African Development Bank for funds, at low interest.  But when government stopped repaying its debts and launched the macro-economic reforms in 2008, DBS -- which is an institution backed by the state -- also organised rescheduling repayments.

The result was that it was unable to secure new loans from these sources to lend out locally.

Until it can again secure new funding from these sources, it is issuing its own bonds at 7% interest per annum. 

Mr Laporte said the fact that two sets of R25 million bonds have nearly all been purchased by commercial banks and the public in general, “is proof that the bank is solvent and also that the purchasers have confidence in the government which guarantees the bonds”.

Mr Laporte explained that this had nonetheless been insufficient to meet all loan applications, especially now that borrowing has increased on account of lower lending rates.

“DBS had to review its lending policy because it was getting more loan requests than it could afford to lend out,” he said.

“It is for this reason that DBS has put on hold all loan applications for purchase of vehicles. It is meanwhile giving priority to loans for more productive sectors, such as tourism and fisheries,” he added.


 

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