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Excessive Borrowing: An Issue concerning the South Korean Govt.
Mar 06, 2007
Government of South Korea is on the lookout for alternatives, other than increasing the interest rates, in order to curb the excessive borrowing trend in the country, Thabo Mbeki, president of SA, said on 11 February 2007, as per Reuters.
Mbeki said that instead of hiking interest rates, targeting the capital adequacy ratio of the banks could be a rather better option to curtail borrowing.
"It isn't necessary to always use what is a blunt instrument, interest rates… you could come at this matter in a more targeted way, to address whatever," he told the SABC TV in an interview. "We have started looking at that question and I am quite sure that later this year we will be able to say something about this."
The suggestion came after a similar threat from the governor of Reserve Bank Tito Mboweni late last year (2006). He had warned the banks that if they did not stop the madness of disproportionate lending that was contributing to the higher rate of inflation, he would be forced to increase the amount required to hold in central bank reserve.
Consumer spending, fueled by the record year-on-year growth of above 25% in credit, is still a concern for the bank even when inflation has been going down beyond expectations for the past few months.
The suggestion came after a similar threat from the governor of Reserve Bank Tito Mboweni late last year (2006). He had warned the banks that if they did not stop the madness of disproportionate lending that was contributing to the higher rate of inflation, he would be forced to increase the amount required to hold in central bank reserve.
Consumer spending, fueled by the record year-on-year growth of above 25% in credit, is still a concern for the bank even when inflation has been going down beyond expectations for the past few months.
As per RNCOS report on “Banking Sector in South Africa”, the number of credit cards rose at a CAGR of 10.68% during 2001 & 2005. In 2005, the number of credit cards reached 280.1 Million, representing a 16.24% growth over the figure of previous year.
The report further states that the sharp increase in credit cards indicates growing demand for borrowing more money owing to the lower interest rates offered by the banks in the country.
About the Report
The research report answers the key questions, such as what does the competitive market landscape look like for the South Africa Banking Industry, what are the various opportunities and challenges before this industry, what are the most prospective areas for banks to invest in near future, which factors will lead to the growth of financial cards, loans and deposits in South Africa, how financial sector charter and BEE (Black Economic Empowerment) are affecting the banking sector in South Africa, and so on.
For more information visit: http://www.rncos.com/Report/IM0100.htm
For more information visit: http://www.rncos.com/Report/IM0100.htm
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