BoB to ‘penalise’ banks for wholesale deposit concentration
Mbongeni Mguni | Wednesday March 11, 2026 08:31
Charges will take the form of additional capital requirements, Governor Lesego Moseki said, explaining that high concentrations of wholesale deposits were linked to rising interest rates and the threat of higher inflation.
“The bank notes with concern that some banks have increased lending interest rates, specifically margins above the prime lending rates, going against the spirit to the directive and maintenance of the accommodative monetary policy posture,” he said at a briefing. “The Bank observes that this reflects the continuance of structural deposit concentration and uneven distribution of liquidity. “As part of the implementation of the Basel III requirements, commercial banks will, during 2026, be compelled to hold additional capital for deposit concentration risk.”
The BoB says the prime lending rate amongst commercial banks rose from 6.09 percent to 7.19 percent last year, whilst the central bank’s own benchmark stayed at 1.9 percent until October, when it moved to 3.5 percent.
The country’s financial sector has suffered from tightening liquidity since last year, due to reduced government spending caused by the prolonged slump in diamonds, which traditionally anchor both budget revenues and foreign currency receipts.
As liquidity has tightened, banks have been forced to increase their rates to attract deposits, particularly the substantial ones offered by wholesale depositors. To accommodate these higher rates, commercial banks raised their lending rates last year, uncoupling from the central bank’s benchmark, amidst an outcry from clients.
Deputy governor, Kealeboga Masalila, told BusinessWeek the new initiative was based on correcting structural imbalances in the country’s financial sector.
“A few large, bulky depositors are pushing up interest rates and making banks raise their rates by saying if you don’t pay us this much, we will take our deposits to someone else willing to pay that,” he said. “This situation is not sustainable, and it’s also a systemic risk where there is uneven distribution of funding, where some banks have these large concentrations of wholesale depositors.”
Masalila stressed that the planned charge was not 'punishment' but rather an incentive to diversify deposit concentration for banks, which would also mitigate risks in the industry and enhance the transmission of monetary policy.
“It’s a systemic financial stability risk because if there’s uneven distribution of this funding or there are banks that have this large deposit concentration, it presents a risk to them in terms of them continuing to be funded if they don’t raise interest rates as required by depositors,” he told BusinessWeek. “Remember, the asset creation or loans they have given out are premised on that funding, and if it's pulled out, there’s a systemic challenge.”
He added: “This is not to punish banks, but to provide an incentive in the form of higher costs of deposit concentration for them to diversify their funding base to mitigate these systemic financial stability risks as well as facilitate monetary policy transmission. “It’s to say 'if you maintain a concentrated portfolio with respect to deposits, you are going to be charged higher in terms of the capital requirements, and it’s in your interest as a bank to diversify your deposit base'. “I’m sure the shareholders of the banks will also be on them to do that because they don’t want a higher capital charge.”
Other BoB officials explained that the charges were being introduced under Basel III principles, which allow the central bank to recognise other risks that banks are exposed to, as part of the capital adequacy assessment process.
Local banks are unlikely to welcome the latest moves from the BoB, as many have increasingly complained of high bureaucracy, regulation and associated costs from the central bank, particularly in the post-pandemic years.
As at October last year, the BoB has maintained a moratorium on banks’ increasing their interest rates.