MASERU — There is need to put in place stringent regulatory mechanisms to ensure commercial banks are able to handle any shocks in the economy, a senior Central Bank of Lesotho (CBL) official has said.
Dr Masilo Makhetha, who is the director of research at the CBL, was addressing a one-day symposium to commemorate the bank’s 30th anniversary.
The commemoration was held at Manthabiseng Convention Centre on Thursday night.
Makhetha presented a paper entitled, Strengthening Micro- and Macro-prudential Frameworks for Financial Supervision and Regulation: Lessons from the Recent Financial Crisis (2007/8).
The paper discussed the latest developments on the global economy.
Makhetha said it was critical for regulatory authorities such as central banks to ensure commercial banks are in a position to absorb any shocks in the economy.
“A resilient banking system is a foundation for sustainable economic growth,” Makhetha said.
He said there was need for financial institutions to demonstrate more transparency about their regulatory capital bases.
Makhetha said the focus should extend beyond commercial banks to cover other institutions connected to the financial sector.
“Financial intermediaries play an important role in the economic development of any economy.
“When they work effectively then other sectors of the economy are able to develop hence increase economic growth,” Makhetha said.
He said commercial banks in Lesotho were over-capitalised to the detriment of the economy.
Makhetha said there were moves in international financial markets to seek to increase the deposits that banks keep at central banks.
These deposits, Makhetha said, would be used in times of financial emergency.
“However the over-capitalisation of the local banks means we are less vulnerable to external shocks,” he said.