The government has said the financial soundness indicators have been providing clear evidence that the banking sector remained profitable, liquid and stable.
Bank of Tanzania (BoT)
According to the Memorandum of Economic and Financial Policies addressed to the International Monetary Fund (IMF), the banking industry in the period ending December last year was well capitalized with liquidity levels above the regulatory requirements.
It stated that the nonperforming loans continue to decline and the increase in government domestic arrears to suppliers does not appear to have adversely affected the banking system.
The overall quality of the loan portfolio improved as reflected by the ratio of nonperforming loans to gross loans which decreased to 7.8 per cent in March 2013 from 8.3 per cent in June last year. Although the stability of the financial industry looks promising for the near future, risks remain.
Thus, the Bank of Tanzania (BoT) said it will continue to maintain vigilance over developments in the financial system, including monitoring compliance against the new required minimum core capital for banks.
Furthermore, the central bank promised to raise Tier 1 and Tier 2 capital ratios by 2.5 percentage points by yesterday to conform with best practice recommended by Basel Committee for Effective Banking Supervision. The buffer is expected to support capital sustainability and reduction of dependence on bailout during crisis.
In light of the fast growth of mobile banking, reaching half the population, and the need to improve oversight of the sector, the BoT is in the final stages of issuing Mobile Financial Services Regulations which were expected to be released by June this year.
The BoT intends to complement the current reserve money targeting framework with a more active use of interest rates in implementing its monetary policy. To this end, BoT has started an internal review of its existing liquidity operations and interest rate structure, to be completed by end-December 2013, as part of the process to develop an active policy rate.
The BoT is continuing to enhance its expertise and benefit from technical assistance in support of the objectives.
