Cabo Verde’s financial system, particularly banking, continues to suffer from vulnerabilities that may affect the strength of its institutions, the archipelago’s central bank said.
The central bank also said in its Financial Stability Report 2018 that this set of vulnerabilities leads to risks to financial stability, such as the bad loans, which are still considered high, credit being focused on a limited number of clients, a considerable amount of assets received as donations and the funding focused on the five largest depositors.
“The results of the stress tests confirm the high vulnerability of the national banking system to credit risk, especially regarding the large concentration of the portfolio, in a context of moderate exposure to liquidity risk and relatively low exposure of banks’ balance sheets to interest rate and exchange rate risks,” the report said.
The document issued on Wednesday said that compared to 2017, banks’ vulnerability to risk increased in 2018.
However, according to the central bank, the analysis of financial stability conditions in 2018, overall and compared to 2017, points to a slight improvement in stability factors related to the macroeconomic and financial environment, the situation of companies, individuals and the payment system.
“It should also be mentioned that risk levels related to the management of institutions have remained unchanged, as has the structure of the banking system, the securities market and the contagion between financial institutions,” said the Bank of Cabo Verde, adding that there was an increase in the exposure of the national financial system to risks related to the solvency and performance of institutions.