By 
Zambia’s banking sector continues to demonstrate strong resilience, maintaining capital buffers well above regulatory requirements, according to the Bank of Zambia’s (BoZ) October 2025 Financial Stability Report.
The central bank noted that commercial banks remain well-capitalised, with sufficient reserves to cushion against potential losses — a sign of sustained confidence in the sector’s ability to withstand economic shocks and preserve financial stability.
BoZ explained that recently introduced capital regulations, particularly the requirement for banks to hold higher levels of Common Equity Tier One (CET1) capital, are expected to further strengthen the system’s resilience.
CET1, regarded as the highest quality form of capital, provides a solid foundation to absorb losses and maintain solvency under stress.
The report highlighted that credit risk in the banking industry has continued to decline, supported by a reduction in non-performing loans (NPLs).
“Credit risk is low, reflected in the NPL ratio being significantly below the prudential threshold,” the report stated.
However, the central bank cautioned that certain vulnerabilities persist, including a high share of foreign currency lending and funding, as well as maturity mismatches that could expose banks to liquidity and exchange rate risks if macroeconomic conditions weaken.
Beyond the banking sector, non-bank financial institutions (NBFIs) also recorded positive growth.
Pension funds saw improved liquidity due to reduced contribution arrears, while insurance companies continued to face challenges with low profitability and solvency risks.
The microfinance sector, meanwhile, was affected by rising credit risk linked to its heavy reliance on loans to public service workers.
BoZ’s assessment further showed that financial market stress had eased, driven by strong corporate earnings and improved investor confidence.
“Financial markets stress is assessed to have eased further, primarily due to higher equity valuations amid strong earnings,” the central bank noted.
Longer-term government and corporate bond valuations also improved as inflationary pressures moderated and sovereign risk declined.
The money market remained stable, with the overnight interbank rate closely aligned to the policy rate, although the foreign exchange market experienced volatility amid a strengthening kwacha.
The central bank also flagged ongoing operational and cybersecurity risks within the financial system.
While the payment and settlement systems continued to support efficient financial operations, BoZ observed that “pockets of operational incidents suggest operational risk remains an area of concern.”
The report further warned that cyber threats persist, with financial institutions continuing to report data breaches and fraud-related incidents.
WARNING! All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express permission from ZAMBIA MONITOR.
Comments