At its meeting held on 7^th July, 2005, the Central Bank of Lesotho Financial Institutions Supervision Technical Committee (FISTC) deliberated and resolved as follows: 

1.                  FOREIGN CURRENCY EXPOSURE FOR THE WEEK ENDING 17 JUNE 2005 

The foreign currency exposure report for the week ending 17^th June 2005 was tabled.  This report is tabled once a month before the committee, but the commercial banks still submit their reports on a weekly basis as prescribed by the regulation.  In accordance with the regulations, a commercial bank can hold a maximum of 15% of its total qualifying capital on a single currency and a maximum of 25% on overall exposure at the end of any business day.  On the basis of the reports tabled before the Committee, all banks complied with the foreign currency exposure regulations. 

2.                  WEEKLY LIQUIDITY FOR THE WEEK ENDED 15 JUNE 2005 

In accordance with the Financial Institutions (Liquidity Requirements 2000), which prescribe that banks have to maintain cash reserves balance with the Central Bank of Lesotho of not less than 3%, and liquid assets of not less than 25% of its total liabilities, the banks duly complied.  The banking industry’s total liabilities amounted to M2.880 Million during this week.  Cash reserves balance held by the industry with the CBL was M100 Million from M91 Million last week.  Liquid assets stood at M1.108 Million, well in excess of the requirements.  Liquidity ratios stood at 3.47% and 38.47%, a clear indication of the high liquidity in the banking industry. 

3.                  RURAL SAVINGS AND CREDIT SCHEME 

The Central Bank of Lesotho took a policy decision to promote financial intermediation to low income and rural communities throughout the country by introducing the Rural Savings and Credit Groups Scheme.  The basis for the policy is to bridge the gap between savings mobilization and resource utilisation between the rural and urban areas, as evidenced by the co-existence of excess reserves in the urban banking sector and the shortage of savings and credit extension to low income and rural communities. 

Nationwide sensitisation campaigns on the scheme are continuing and communities are beginning to show interest in the same.  Requests by way of information seeking, guidance on identifying possible project ideas and compilation of a business plan are being received.  So far the Bank has received abundant requests on ways and means of accessing the facility under the scheme.  To this end, the Bank decided to translate the Blueprint for Rural Savings and Credit Groups into Sesotho in order to widen the outreach of the scheme in the rural areas of Lesotho. 

4.                  ESTABLISHMENT OF A CREDIT INFORMATION REGISTRY IN LESOTHO 

Following the adverse decision taken by Trans Union not to set up a credit bureau in the country, the Central Bank of Lesotho took a policy decision to establish a Credit Information Registry (CIR) for banks, to be housed within the Bank. 

The CIR can be used to support on-site inspections and to carry out off-site monitoring of credit and concentration risk (one posed by creditors’ loan portfolio being largely accessed by few borrowers).  Since the CIR contains practically the entire population of loans granted by each credit institution, it can be constructed both for individual banks and peer groups. 

The information held in the CIR can also be used for off-site monitoring. If a bank overvalues the credit worthiness of its borrowers, this will be detected when it is compared with the information reported by other credit institutions that are also creditors of that bank’s borrowers.  Since this behavior can be penalised by the supervisor (Central Bank of Lesotho), the incentive to report truthfully is very high. 

The Central Bank of Lesotho is in the process of establishing a CIR, based on models from other countries such as Mauritius, Nigeria, Germany, Spain and Chile.  Once a study has been completed, the Bank shall immediately contextualise it to Lesotho’s environment in order to determine its effective practicality, as well as to bring on board other major stakeholders such as Government, business, and financial sectors. 

5.   CONCLUSION 

The Central Bank of Lesotho remains committed to the continued strengthening of the financial sector in Lesotho.  This is realised through restoring the commercial banks’ confidence to operate in Lesotho, by ensuring that the Bank has the capability to effectively ensure sustainability of a sound financial system.

2005 July 08