S.Africa banks stable but households a risk: c.bank

(Reuters) - South African banks remain well capitalised and stable despite a recent deterioration but high levels of household debt pose a potential threat to the financial system, the central bank said on Wednesday.

The Reserve Bank said in its latest Financial Stability Review local banks had been largely protected against the direct effects of the global financial crisis.

However, spill-over effects from the global turmoil had hit the local stock market, portfolio investment flows had reversed and bad loans had increased over recent months.

"South African banks maintained levels of capital well in excess of the already prudent regulatory environment, and their degree of leverage as well as off-balance sheet risk exposures were much lower than those of the failed banks of other countries," it said in the twice-yearly report.

South Africa's banks have avoided the worst of the international credit crunch, partly due to exchange controls that limited outside exposure, and fairly conservative lending practices.

The downturn has hit the broader economy, though, knocking manufacturers and miners, with the economy likely to already be in its first recession in 17 years.

The central bank has responded by cutting its repo rate by 350 basis points to 8.5 percent since December to try and boost growth and the government and its utilities are to spend 787 billion rand over the next three years on infrastructure.

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