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AfricaJuly 1 2016

Angola’s banks will sink or swim over wave of consolidation and regulation

A dollar liquidity crunch amid regulatory concerns, bad loans and low oil prices have tested Angola’s banks recently. Now central bank moves to tighten rules and a wave of consolidation are shaking up the sector, resulting in survival of only the fittest. James King reports.
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Though Angola’s economy has been hit hard by the sustained drop in oil prices, the impact on the country’s banking sector has been more nuanced. After accruing total assets of about $79bn during the boom years, according to KPMG, the country’s lenders are now squaring up to an altogether different operating environment. Severe challenges exist – not least of which is a US dollar liquidity crunch – and system-wide change in the form of consolidation is on the way.

But on the whole, Angola’s larger banks have weathered the worst of these strains, even if most of them have taken serious hits to their profitability and asset growth. Strong capital positions are helping, as is the forward-looking approach to regulation and compliance adopted by some of these players. Smaller banks, however, are having a tougher time of it. The twin burden of an economic slowdown and a more stringent regulatory environment are beginning to take their toll.

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