Large banks in South Africa have meaningfully increased their holdings of domestic sovereign debt since 2015. This represents a strengthening of the ‘bank-sovereign nexus’ implying higher exposure to sovereign credit risk by the domestic banks. While higher sovereign debt holdings has been attractive as it has offered banks higher returns, it also may have financial stability implications by affecting the sensitivity of bank balance sheets to sovereign creditworthiness. Get a free trial to our new Banking Dashboard during July to check out this and other indicators of developments in the South African banking sector.
