FINANCIAL STABILITY COMMITTEE MEETS

( a) extensive exposure to, and over- reliance of the economy on, the external sector and Government;

( b) narrow economic base ( that is, lack of economic diversification), hence lower resilience to shocks;

( c) enduring sectoral interlinkages, involving reliance by banks on funding by non- bank financial institutions;

The Financial Stability Committee ( FSC) met on April 27 and May 10, 2021 to

( d) emergence of innovative market products, payment platforms and services, requiring quick policy and regulatory adaptation; and

( e) continuance of the listing of Botswana in the European Union List of high- risk third countries with AML/ CFT compliance deficiencies.

deliberate on recent developments in the financial sector, as well as address

Nevertheless, the FSC observed that this was against the background of, first, prospects for economic recovery supported by the marked

regulatory improvement and in global public market interest sentiment, issues the rollout relating of the COVID- to 19 the vaccine stability, and ongoing performance policy support, and locally, the Economic Recovery

and Transformation Plan, as well as accommodative monetary policy. Second, maintenance of transparent and predicable policies and,

prospects therefore, for a stable the macroeconomic domestic financial environment, system. supportive of progressive financial sector activity and stability. Third, the financial system continues to be resilient, despite the adverse effects of COVID- 19, characterised by strong capital and liquidity buffers, and remains profitable, adaptive and innovative.

The FSC noted that, overall, vulnerabilities that could elevate risks to financial stability have, thus far, been generally contained. In particular,

The FSC identified and discussed recent global, regional and domestic developments

commercial bank credit growth and corporate leverage remain moderate, with a modest ratio of non- performing loans; adequate market liquidity; and asset prices ( that is, yields on corporate bonds; yields on government securities and commercial real estate prices) that are

that impact on the performance and resilience of the financial sector amid the

stable. Moreover, economy is projected to grow by 8.8 percent in 2021, involving recovery of several sectors and, therefore, positive for financial sector performance.

devasting impact of the COVID- 19 pandemic on the lives and livelihoods of Batswana.

Notwithstanding this positive assessment, the FSC noted the elevated risks associated with the structure and performance of the economy

The FSC acknowledged the pre- existing financial stability vulnerabilities for Botswana

that relies on mining and tourism, as well as a protracted COVID- 19 pandemic and any challenges with the vaccine rollout and, therefore, maintenance of movement restrictions. It was observed that this could have an adverse impact on export receipts, fiscal position, and

as follows:

economic performance broadly that can translate to the weakening of the financial sector.

( a) ( b) ( c) ( d)

FINANCIAL STABILITY COMMITTEE MEETS

The Financial Stability Committee ( FSC) met on April 27 and May 10, 2021 to deliberate on recent developments in the financial sector, as well as address regulatory and public interest issues relating to the stability, performance and prospects for the domestic financial system.

The FSC identified and discussed recent global, regional and domestic developments that impact on the performance and resilience of the financial sector amid the devasting impact of the COVID- 19 pandemic on the lives and livelihoods of Batswana. The FSC acknowledged the pre- existing financial stability vulnerabilities PRESS for Botswana RELEASE as follows:

On financial markets infrastructures ( FMIs) and regulatory developments which have a bearing on the efficient functioning of the financial services sector, the FSC noted the following prospective projects: the revision of the Non- Bank Financial Institutions Regulatory Authority Act and extensive the Financial exposure Intelligence Act; to, as and well as over- the drafting reliance of the of Credit the Information economy Bill and on, the the Secured external Transaction on Movable Property Bill ( which will provide for the establishment of the Collateral Registry). The FSC also noted ongoing policy discussions and work on the establishment sector of and a Deposit Government; Protection Fund ( DPF) for Botswana. The FSC further observed that FMIs ( namely payment systems, central securities depository and securities settlement systems) remain stable and resilient thus strengthening and preserving domestic financial

narrow economic base ( that is, lack of economic diversification), hence lower

stability. In addition, the domestic supervisory authorities continue to embrace financial technologies through policy support for market developments and regulatory adaptation to ensure orderly business conduct, consumer protection and maintenance of financial system integrity.

resilience to shocks;

Regarding Anti- Money Laundering/ Combating the Financing of Terrorism/ Counter Proliferation Financing ( AML/ CFT/ CPF) matters, the FSC

enduring sectoral interlinkages, involving reliance by banks on funding by non

observed that Botswana remains on the Financial Action Task Force list of jurisdictions with strategic AML/ CFT deficiencies and accordingly that the authorities continue to implement the required action plans. Therefore, the likelihood of elevated risk to financial stability due to

bank financial institutions;

ongoing strategic AML/ CFT deficiencies is expected to recede going forward.

emergence of innovative market products, payment platforms and services,

A comprehensive assessment of the conditions that could affect the stability of the domestic financial system is contained in the Financial Stability Report to be published at the end of May 2021.

requiring quick policy and regulatory adaptation; and

Note to Editors:

The FSC was officially launched in February 2019, and comprises senior officials of the MFED, the Bank, NBFIRA, and Financial Intelligence Agency ( FIA). These authorities have signed a Memorandum of Understanding ( MoU) for the purpose of information sharing, cooperation and communication in the implementation of the Macroprudential Policy for Botswana. The FSC for Botswana, therefore, seeks to foster and promote financial stability by coordinating the development of regulatory, supervisory and other financial sector policies in recognition of the interconnectedness across markets and institutions.

For further information, please contact, Dr. Seamogano Mosanako. Head of Communications and Information Services, on mosanakos@ bob. bw or telephone at + 267 360 6083 or 360 6382 or + 267 360 6315 or www. bankofbotswana. bw