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Credit Risk and Securitisation in the South African Banking Sector

Daniel Mokatsanyane (), Paul-Francois Muzindutsi () and Diana Viljoen ()
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Daniel Mokatsanyane: North-West University
Paul-Francois Muzindutsi: University of KwaZulu-Natal
Diana Viljoen: North-West University

Acta Universitatis Danubius. OEconomica, 2017, issue 13(2), 102-121

Abstract: This paper investigates the relationship between credit risk and securitisation in the South African banking sector. Panel data analysis was used to analyse the annual observations from four major South African banks for a sample period from 2005 to 2014. Results indicate that the basis for securitisation variation in South African banks stems from capital, bank size and the economic growth of the country. A positive impact of securitisation on credit risk was discovered. The paper revealed that, contrary to previous findings, the global financial crisis of 2007–2009 had no effect on the securitisation in the South African banking sector. This paper also found that size has a significant influence on capitalisation. Compared to small banks, large banks tend to securitise more and take on further credit risk. Therefore, banks should increase or maintain an acceptable capital amount to hedge against any unexpected risks. Proper systems should be established and adopted to encourage repayment of loans by borrowers.

Keywords: Bank stability; solvency risk; cointegration, bank performance; South Africa (search for similar items in EconPapers)
Date: 2017
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