IMF Working Papers Volume 2022 Issue 051: South Africa: The Financial Sector-Sovereign Nexus (2022)

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South Africa: The Financial Sector-Sovereign Nexus

Author:

Mr. Heiko Hesse

Mr. Heiko Hesse
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and

Mr. Ken Miyajima

Mr. Ken Miyajima
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Series:: IMF Working Papers

Volume/Issue:: Volume 2022: Issue 051

Publication Date:: 04 Mar 2022

DOI:: https://doi.org/10.5089/9798400204418.001

ISBN:: 9798400204418

ISSN:: 1018-5941

Pages:: 21

Keywords:: South Africa; Financial Sector; Sovereign Debt; Bank-Sovereign Nexus; Home Bias; Financial Stability; Banking Risk; Sovereign Risk; Capital Flows; Bank Regulation; nonresident holding; holdings of Government Securities; banking risk; holdings of government securities; investor Base; nonbank financials; Sovereign bonds; Government securities; Domestic debt; Credit risk; Africa; Global

Legal-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.

Series:: IMF Working Papers

Volume/Issue:: Volume 2022: Issue 051

Language:: English

Publication Date:: 04 Mar 2022

DOI:: https://doi.org/10.5089/9798400204418.001

ISBN:: 9798400204418

ISSN:: 1018-5941

Pages:: 21

Keywords:: South Africa; Financial Sector; Sovereign Debt; Bank-Sovereign Nexus; Home Bias; Financial Stability; Banking Risk; Sovereign Risk; Capital Flows; Bank Regulation; nonresident holding; holdings of Government Securities; banking risk; holdings of government securities; investor Base; nonbank financials; Sovereign bonds; Government securities; Domestic debt; Credit risk; Africa; Global

Legal-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.

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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.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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