Banking sector has robust liquidity

**Staff Writer **

The October 2026 Financial Stability Report issued this week by the Bank of Namibia, in partnership with the Namibia Financial Institutions Supervisory Authority (NAMFISA), has confirmed that the national banking sector possesses robust liquidity and capital defenses capable of withstanding severe macroeconomic shocks.

Despite a volatile global landscape marked by supply chain disruptions, geopolitical friction, and domestic climate risks, regulators announced that Namibia’s financial infrastructure remains fortified, the report stated.

According to central bank data, commercial banking institutions have significantly bolstered their cash and high-quality liquid asset reserves during the first half of 2026.

A key indicator of systemic safety, the Liquidity Coverage Ratio (LCR), surged from 145.1% at the end of 2025 to 168.9% by mid-2026.

This aggressive liquidity buildup was largely driven by a 29% increase in commercial bank investments in secure local Treasury bills, which averaged N$21.6 billion during the review period.

Compounding this stability, domestic funding conditions remained highly favorable. Namibian deposit growth surged by 10% easily outstripping a modest 4.1% expansion in credit lending.

This dynamic caused the industry-wide loan-to-deposit ratio to fall to 82.4%, leaving commercial banks with substantial internal capital to finance local operations without relying on volatile external funding channels.

In addition to monitoring current market liquidity, the Bank of Namibia’s macroprudential team deployed advanced stress-testing models to simulate how the banking system would absorb a prolonged, severe economic crisis.

The banking system’s total Capital Adequacy Ratio (CAR) demonstrated remarkable resilience, the report said.

The Financial System Stability Committee (FSSC) emphasized that even at the lowest point of the three-year adverse projection (13.7 %), the banking sector’s capital buffers remained comfortably above the statutory regulatory minimum of 12.5%.

“The stress test results confirm that, given its current level of capitalisation, the banking sector can absorb the assumed shocks even under adverse, yet plausible macrofinancial scenarios,” the FSSC stated in its executive summary.

Combined with an actual, real-world improvement in asset quality, which saw non-performing loans (NPLs) fall to 4%, the central bank concluded that the macroprudential policy stance remains highly appropriate to protect Namibian consumers and ensure broader financial stability.

Large counterparty exposures within Namibia’s banking sector experienced a notable contraction during the first half of 2026, dropping 8.7% to N$27.8 billion.

This reduction has effectively minimized concentration risk and reinforced the broader resiliency of the country’s domestic financial framework.

According to the report, the downward trend was primarily driven by a substantial pullback in credit exposure to the mining sector, highlighted by the successful settlement of a single massive exposure worth N$1.9 billion earlier in the year.

Meanwhile, large credit concentrations within the agricultural sector remained steady and unchanged.