This dissertation explores and explains the reason why banks generally fail and more specifically why banks have failed since South Africa realized democracy in 1994. Bank failures are a global phenomenon and come at a high cost to the depositors , the fiscus and can lead to economic instability should the failure be systematic. There are several causes of bank failures and theoretically, these include credit risk, market risk, liquidity risk, capital requirements , bank regulation, inefficient management and external economic factors. The banks that failed during the period commencing from 1994 to date include Prima Bank, Sechold Bank, African Bank, Community Bank, Islamic Bank, FBC Fidelity Bank, New Republic Bank, Regal Treasury , Saambou and BoE. Detailed analysis of the nine banks referred to above is done in Chapter Four wherein, in respect to each bank, the background of the institution , the analysis of the financial statement, where available or the banking returns lodged with the South African Reserve Bank, reasons for the failure of the bank as well as the resultant outcome of the failure has been examined. The causes of failure, the symptoms of failure and the recommendations for prevention of failure are finally considered and discussed in Chapter Five.
FAQs
Causes of bank failure in the post democratic South Africa.? ›
There are several causes of bank failures and theoretically, these include credit risk, market risk, liquidity risk, capital requirements , bank regulation, inefficient management and external economic factors.
What are the main causes of bank failure? ›Banks can fail for a variety of reasons including undercapitalization, liquidity, safety and soundness, and fraud. The chartering agency has the authority to terminate the bank's charter and appoint the FDIC to resolve the failure.
What went wrong at African Bank? ›African Bank's annual profit has slumped by almost a third after it was forced to about double its provisions to cover souring loans even as it ramped up advances.
What were some major effects of these bank failures? ›That is the monetary explanation for the Great Depression. Bank failures, bank runs caused a contraction of the money supply, causes a decline in spending, investing, and GDP.
What problems do banks face in South Africa? ›Reduced business activity from SMEs, larger amounts of bankruptcies and non-performing loans, and diminished capital inflows would all point to a trickier landscape for South African banks to navigate. Load shedding is also causing more direct problems for South Africa's banks.
How does South Africa deal with bank failure? ›The resolution framework is a critical element of South Africa's financial sector safety net. It enables the RA to manage the failure of a designated institution in a manner that mitigates the impact on financial stability, protects vulnerable depositors and reduces the need to use taxpayer funds.
What banks are failing in 2024? ›2024 in Brief
There are no bank failures in 2024. See detailed descriptions below.
The largest bank failure ever occurred when Washington Mutual Bank went under in 2008. At the time, it had about $307 billion in assets. During the uncertainty of the banking crisis, however, Washington Mutual experienced a bank run where customers withdrew almost $17 billion in assets in less than 10 days.
Are South African banks in danger? ›While stocking up on government debt at high returns is attractive to local banks, it increases their risk as it exposes them to the state's struggling finances. The South African Reserve Bank's biannual health check in November 2023 warned that systemic risk to the country's financial stability has remained elevated.
Which bank was hacked in South Africa? ›The Development Bank of Southern Africa (DBSA) has become the latest financial institution to suffer a ransomware attack. In a statement issued yesterday, the DBSA says it was subjected to a ransomware attack by a malicious threat actor.
Are the top 5 South African banks too big to fail? ›
South Africa's major banks are currently 'too big to fail' – where the collapse of just one bank would result in devastating and far-reaching problems for the entire economic system, says Ismail Momoniat, deputy director-general for Tax and Financial Sector Policy at the National Treasury.
What two major banks failed? ›The collapses of Silicon Valley Bank and Signature Bank in March 2023—then the second- and third-largest bank failures in U.S. history—took consumers by surprise. Subsequently, three more banks failed in 2023: First Republic Bank in May, Heartland Tri-State Bank in July and Citizens Bank of Sac City in November.
How can bank failure be prevented? ›As a regulator, the FDIC strives to prevent bank failures by monitoring the industry's performance and enforcing regulations intended to make sure financial institutions operate in a safe and sound manner.
What two banks failed this week? ›Two major California banks — Silicon Valley Bank and First Republic — have failed. While some banking industry leaders have said the immediate crisis is over, stock prices for other regional banks, including PacWest and Western Alliance, fell this week.