The credit ratings of SA banks will be downgraded after the decision by three investor services agencies to downgrade the country’s credit risk rating. As banks depend on the health of the economy as a whole for sustainable business and are among the largest holders of sovereign bonds, their credit ratings are never higher than that of their country.
The higher the risk that loans may not be repaid the more interest is charged. This is why credit ratings are important. Government borrowing costs — the interest rate at which the state is able to raise funds — is an important reference point for interest rates across the economy, from personal and home loans to investment financing facilities for corporates and other businesses.
The higher the risk that loans may not be repaid the more interest is charged. This is why credit ratings are important The money the government and state-owned enterprises have borrowed from banks and other SA financial institutions must be paid back. Banks hold in trust the salaries and savings of SA workers, professionals and companies. It is their deposits that banks use to extend credit for investment in economically productive infrastructure, job creation and inclusive economic growth.
Ratings agency decisions are based primarily on their assessment of whether a country will be able to afford to service its debt. SA’s numbers simply do not add up. Accelerated inclusive economic growth and job creation, with a significant and sustainable reduction in state expenditure, is our best hope.
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