Johannesburg - While a number of the world's biggest banks have avoided bankruptcy only after intervention by central banks and governments, Reserve Bank governor Tito Mboweni said yesterday that no South African bank had asked for help.
He was speaking after the meeting of the bank's monetary policy committee (MPC), which decided to keep the bank's official repo rate unchanged at 12 percent despite the recent round of synchronised rate cuts abroad.
Mboweni refused to be drawn on whether a rate cut is in sight, after 5 percentage point in hikes since June 2006.
The MPC is scheduled to meet again in December, but Mboweni can call a special meeting whenever he thinks it is necessary to adjust rates.
He praised his counterparts abroad, who "quite correctly embarked on a co-ordinated effort" to cut interest rates, as well as governments that have taken emergency measures to stabilise troubled markets. "I commend them for this global approach, which is needed in times like these."
Howerver, he said that after analysing the domestic situation, the MPC had concluded that it was appropriate to keep the local rate at its current level.
First National Bank chief executive Michael Jordaan said after the MPC meeting: "It is important to state that South Africa remains largely insulated from the global financial crisis, mainly as a result of the prevailing exchange control regulations."
The regulations prevent banks from investing in financial, as opposed to operational, assets abroad.
The interest rate decision had no effect on the JSE as it had been expected and investors have been more focused on events abroad, making them increasingly risk averse.
Colen Garrow, an economist at Brait, pointed out the rate cuts abroad had increased the interest rate differentials between South Africa and other countries - "10.5 percent with the US and 8.25 percent with the euro zone". Wide positive differentials support the rand.
Michael Power, an investment strategist at Investec Asset Management, pointed out that, in effect, South Africa had already had the equivalent of a rate cut.
"The old rule of thumb is that a 4 percent fall in the currency is equivalent to a 1 percent cut in interest rates. Since the beginning of September, the rand has fallen 20 percent, creating the monetary loosening equivalent to 5 percent."
Mboweni spoke of "a moderate improvement in the inflation outlook" since the previous MPC meeting and said inflation was expected to peak at 13.3 percent in the third quarter and to average 6.9 percent next year, after a significant decline in the first quarter, and return to the target range of between 3 percent and 6 percent only in the second quarter of 2010.
The fall in oil prices is supporting the improved inflation outlook. Brent blend crude oil was at $112 (R1 000 at yesterday's exchange rate) a barrel at the previous MPC meeting, but traded at $82.59 a barrel yesterday, a level last seen a year ago.
Mboweni said the benefits of a lower oil price "will be offset to some extent by the recent depreciation of the rand".
The rand was R8 to the dollar at the time of the previous meeting in August.
However, Garrow said the rand price of crude oil was falling, "with Brent at R773 a barrel, its lowest level since February 2008".
Meanwhile, inflationary momentum remains strong.
CPIX (the consumer price index minus mortgage rates) inflation was 13.6 percent in August, while headline inflation was 13.7 percent and producer price inflation was over 19 percent, largely due to the historic effect of high food and fuel prices.