Capital structure matters. All else the same, credit quality benefits—or default risk is lower than otherwise—the longer is the term to maturity of outstanding debt. Longer maturities reduce the risk that the borrower may not be able to fund the principal payment once the obligation matures. Today’s historically low bond yields have increased the attractiveness of locking up access to financial capital for an extended period and have thereby reduced principal repayment risk.
A Bank Code is intended to be an affordability assessment to determine the client’s ability to repay their short-term financial obligations. It is therefore used to determine whether a customer is considered an acceptable risk for a bank for a specified amount borrowed over a specified period.
Our credit analysis team have put together a fact-based Credit Risk outlook for South Africa covering the economy, business and consumer confidence, political stability, and a sectoral update.