The central bank is collaborating with other financial regulators under the auspices of Tanzania Financial Regulators Forum to have a sound banking system in BoT’s Monetary Policy Statement, Mid Year Review for 2011/12.
“Subsequently, the assessment of financial stability and early warning indicators will be measured against these thresholds,” stated the BoT report, adding that the bank revised the risk-based supervision framework to reflect new developments in supervisory principles and standards and incorporate best practices in risk management.
Business continuity guidelines were also issued to banks and financial institutions, initiating the process of developing prudential strategies for effective supervision of Islamic banking that has been growing recently. In addition, the bank said in the statement, efforts are underway to enhance the regulatory environment and risk management to support a safer, efficient and resilient financial system.
BoT Director of Policy and Research Joe Massawe told the 'Daily News' in Dar es Salaam on Thursday that the bank is tirelessly improving the banking networks for swift and smooth implementations of the monetary policies. “If banking system is unsound, it is likely that all networks coordinated by the BoT become a failure,” observed Dr Massawe while commenting on the move by the bank to formulate regulations and guidelines for the Mobile Financial Services.
During the year ending December 2011, as contained in the mid year report, the bank’s assessment concluded that the financial sector remained stable as reflected by the financial soundness indicators and the results of stress tests of the banking sector. The sector was adequately capitalized with liquidity levels above regulatory requirements. The ratio of non-performing loans (NPLs) declined to 6.7 per cent from 9.8 per cent recorded at the end of December 2010, showed the statement.
According to the bank report, efforts taken to improve the quality of loan portfolios aimed at strengthening credit underwriting and administration practices, strict follow-up and recovery of NPLs, and a focused supervisory attention on banking institutions with high bad loans.
The sector also continued to be profitable with an average return on assets of 2.7 per cent and 15.1 per cent return on equity. The ratio of gross loans to total deposits (lending ratio) was 64.5 per cent, which is within the regulatory limit of 80 per cent required for each individual institution.