BoB warns as banks test interest rate moratorium
Mbongeni Mguni | Monday May 11, 2026 06:00
Since October last year, the BoB has restricted banks from increasing their prime lending rates, the benchmark rate against which other credit products and services are priced within banks.
The move came after a sharp upswing in interest rates amongst banks due to the shortage of liquidity in the market.
However, whilst banks have maintained their prime lending rates in line with the BoB’s directive, they have increased the margin between the anchor rate and other rates they charge for different products and services.
Central bank governor Lesego Moseki said the disparity had been noted.
“The bank notes with concern that banks continue to increase lending interest rates, specifically widening the margins above the prime lending rates, undermining the policy intent,” he told a media briefing last week.
Separately, the governor told BusinessWeek that engagements were ongoing with banks on the matter, adding that it was not the BoB’s intention to initially respond with penalties.
“We have two departments that deal with the commercial banks directly, and if there is need where banks are not abiding by the guidelines that we provide, we can impose penalties,” he said. “But at this stage, we don't want to go through that. “We want to persuade the banks to help transmit monetary policy.”
Deputy governor, Kealeboga Masalila, told BusinessWeek the bank’s Business Conduct and Regulatory Compliance department was scheduled to kickstart an assessment of prevailing interest rates in the market.
“The department will go to all the banks to try to appreciate what they are charging in terms of interest rates for loans, across all the banks, across all the products and therefore determine the effective interest rates on categories of goods and on individual loans. “Essentially, then you will have a full picture in terms of information and of knowing where loans are priced, which price dominates in the market, and that will inform us to maintain the engagement with individual banks, depending on where they are, and also banks as a collective,” he said.
Masalila said the exercise was being done in the interest of good business conduct, sound monetary policy transmission, and supporting both economic performance and transformation initiatives.
“We are very deliberate and intentional in these engagements, so that we are all projecting positivity about economic performance,” he told BusinessWeek.
In the wake of the increase in the BoB’s baseline Monetary Policy Rate (MoPR) to 5.5 percent from 3.5 percent last week, all banks have announced that they would not change their prime lending rates, in line with the central bank’s directive. However, banks have also made it clear that products and services whose rates are linked to the MoPR would change.
The local financial market has faced a liquidity crunch since 2024, as government has expanded its borrowings in the wake of the prolonged diamond slump. The situation has resulted in banks fighting for deposits and raising their rates to attract them, necessitating lending interest rate hikes to cover the spread.
The BoB says the escalating interest rates are also a sign of high depositor concentration amongst banks, where “a few large, bulky depositors are pushing up interest rates”.
Last week, the central banks said commercial banks will, by the end of the fourth quarter of 2026, be required to hold additional capital for deposit concentration risk.