ADEQUACY RATIO DECREASES, NPLs SOAR TO THREE-YEAR HIGH

Banking Sector in Mozambique Faces Challenges

Maputo, Mozambique - The banking sector in Mozambique has faced a significant setback with the adequacy ratio decreasing and non-performing loans (NPLs) reaching a three-year high.

Decline in Adequacy Ratio and Rise in NPLs

According to recent data released by the Central Bank of Mozambique, the adequacy ratio stood at 15.1% in 2014, down from 17.9% in 2012. This decline is attributed to an increase in credit extended to the economy, leading to a rise in NPLs.

• Adequacy ratio: 15.1% (2014) vs. 17.9% (2012)
• NPLs: 5.3% (2014) vs. 2.3% (2012)

Regulatory Measures and Challenges Ahead

The Central Bank of Mozambique has implemented various regulatory measures to ensure the stability of the banking sector, including Basel II framework and anti-money laundering regulations.

However, there are challenges ahead for the supervisory authority, including:

• Recruitment of qualified supervisors and bank examiners: many lack appropriate training and academic qualifications
• Compliance with best international practices: recent Financial Sector Assessment Program identified areas where Mozambique’s banking sector falls short

Efforts to Promote Financial Inclusion and Stability

To promote financial inclusion and stability, the Central Bank has implemented various measures, including:

• Establishment of Guarantee Deposit Fund
• Emergency Liquidity Assistance
• Enhancement of supervisory framework to better address emerging risks in the financial system

Conclusion

The report highlights the need for continued efforts by the banking sector and regulatory authorities to strengthen governance, risk management, and supervision practices to ensure the stability and sustainability of Mozambique’s banking system.