Credit default is the main risk for Cape Verde’s banking sector

19 June 2013

The amount of defaulted loans at Cape Verde’s retail banks remained high in 2012 and has been growing since 2010, said the Bank of Cape Verde in its latest financial stability report.

In the report, which was published Tuesday, the central bank said that credit risk was the main risk for the banking system as lending is mainly focused on the housing and construction sectors.

As a result, the central bank recommended that banks boost their provisions in order to take on the defaults as impairment losses.

In the report the Bank of Cape Verde noted that the banking sector’s exposure to non-financial companies linked to the real estate sector remained high at over 10 percent of equity, “a level that is considered high risk”.

The bank also said that the risk factors are likely to increase due to uncertainty surrounding the upswing of both the Cape Verdean and international economies and that it will therefore continue to apply the measures needed to boost the archipelago’s financial system. (macauhub)