The overall soundness of the banking industry remained robust in 2024, supported by strong profitability and capital levels amidst enhanced efficiency.
According to the 2024 Financial Stability Review, the Banking Sector Soundness Index (BSSI) ended 2024 above its long-term trend, indicating improved soundness.
This development reflects the impact of the Domestic Debt Exchange Programme regulatory relief measures, a rebound in earnings, adequate liquidity, and improved efficiency conditions.
According to the report, the main risks to the banking industry’s soundness remain the elevated Non-Performing Loans and undercapitalisation of a few institutions. These risks, it said, are expected to moderate on the back of recapitalisation, sustained macroeconomic recovery and enhanced risk management practices of banks.
Liquidity Conditions
Also, liquidity conditions broadly improved during the year.
Broad liquid assets (cash and investment) to total assets increased to 66.9% at end-December 2024 from 65.7% at end-December 2023.
Broad liquid assets to short-term liabilities also increased to 80.1% from 79.5% over the review period.
At the end of December 2024, core liquidity indicators also improved, suggesting that the banking industry had the capacity to meet its financial obligations.
Cost-to-Income Ratio
The report said the banking sector was relatively cost-efficient in 2024.
The cost-to-income ratio appeared to have stabilised at pre-DDEP levels, following a significant increase in 2022 that resulted from the adjustment for DDEP-related losses.
The cost-to-income ratio fell to 79.1% in 2024 from 80.1% in 2023 and 120.8% in 2022.
The decline in the cost-to-income ratio to pre-DDEP levels, the report said reflects a slowdown in growth in operational expenses and minimal impairment adjustment relating to the Eurobond restructuring.
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