South Africa: The Financial Sector-Sovereign Nexus

March 4, 2022

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Format: Chicago

Heiko Hesse, and Ken Miyajima. South Africa: The Financial Sector-Sovereign Nexus, (USA: International Monetary Fund, 2022) accessed November 12, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Globally, financial institutions have increased their holdings of domestic sovereign debt, tightening the linkage between the health of the financial system and the level of sovereign debt, or the “financial sector-sovereign nexus,” during the ongoing COVID-19 pandemic. In South Africa, the nexus is still relatively moderate, albeit rising, and the increased focus of the Prudential Authority on the associated risks provide reassurance. Options to mitigate such risks through the use of regulatory measures can be explored. However, absent the necessary fiscal consolidation and structural reforms, risks from the nexus to both the financial system and the sovereign will increase.

Subject: Credit risk, Domestic debt, Financial institutions, Financial regulation and supervision, Government securities, Public debt, Sovereign bonds

Keywords: Africa, Bank Regulation, Banking risk, Banking Risk, Bank-Sovereign Nexus, Capital Flows, Credit risk, Domestic debt, Financial Sector, Financial Stability, Global, Government securities, Holdings of government securities, Holdings of Government Securities, Home Bias, Investor Base, Nonbank financials, Nonresident holding, South Africa, Sovereign bonds, Sovereign Debt, Sovereign Risk

Publication Details

Pages:

21
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/051
Stock No:

WPIEA2022051
ISBN:

9798400204418
ISSN:

1018-5941

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