The South African Reserve Bank (SARB) considers the local banking sector to be healthy and robust and does not agree with the decision of rating agency Moody’s Investor Service to downgrade four of the country’s biggest banks.

This follows a statement issued by the rating agency, stating that it has downgraded by one notch to Baa1 the country’s four biggest banks namely Standard Bank, Absa, FNB and Nedbank.

“The SARB notes the decision by Moody’s Investor Service (Moody's) to downgrade four of South Africa’s major commercial banks by one notch and placed them on review for a possible further downgrade.

“While the SARB respects the independent opinion of rating agencies, we do not agree with the rationale given in taking this step, nor do we agree with the assessment it is based on,” said the SARB’s Head of Group Strategy and Communications, Hlengani Mathebula.

According to the central bank, on Tuesday, the rating agency refers to a lower likelihood of sovereign systemic support based on decisions taken recently in relation to African Bank Limited (African Bank).

“This concern stands in sharp contrast to the support actually provided by the SARB.

“Notwithstanding this downgrade, Moody’s has confirmed the resilience of the South African banking system and in their own view … notes the broad resilience demonstrated by South African banks in the past, including the management of adverse economic environments, and recognises the solidity of key system financial metrics,” said Mathebula.

African Bank Investment Limited

Earlier this month, the Reserve Bank announced that African Bank Investment Limited (Abil) has been put under curatorship and that it would pay R7-billion of African Bank’s bad loan book.

Abil will receive a R10-billion capital injection by a range of banks such as Capitec Bank and Investec Bank Limited, which have formed a consortium to underwrite the R10-billion capital raising.

The downgrade of the four banks follows the rating agency’s downgrade of Capitec Bank a few days earlier.

“The South African banking sector remains healthy and robust,” said the SARB.