Since the release of the June 2025 FSR, global financial markets have demonstrated resilience amid heightened geopolitical and trade uncertainties.

Equity markets rebounded after the United States (US) announced new tariffs in April 2025, driven by strong growth in technology- and artificial intelligence (AI)-focused equities. Despite easing financial conditions, gold prices surged to historic highs, reflecting ongoing investor risk aversion and diversification away from other traditional safe[1]haven assets. Concerns persist regarding rising global government debt, which is projected to reach nearly 100% of gross domestic product (GDP) by 2030. This raises refinancing risks and concerns over the potential over-reliance on banks and other domestic institutions to absorb government debt.

South Africa’s equity market also recovered after the April 2025 turmoil, with the JSE Limited (JSE) All-Share Index (Alsi) reaching an all-time high in October 2025. Government bond yields declined to six-year lows amid an improved fiscal outlook, supported by lower inflation, removal from the Financial Action Task Force (FATF) greylist, the lower inflation target announced in the Medium-Term Budget Policy Statement (MTBPS), the credit rating upgrade by Standard and Poor’s (S&P) Global Ratings, and expectations of policy rate cuts. Improved tax revenues and strategic reserve drawdowns from the Gold and Foreign Exchange Contingency Reserve Account (GFECRA) also supported short-term fiscal consolidation. Nonetheless, public sector debt remains elevated at 78.1% of GDP as of June 2025, with repeated upward revisions in recent years.

Banking sector profitability – measured by return on equity – remained above its 10-year average. Capital adequacy ratios remained robust, reflecting sector resilience. Non-resident investors have increased their holdings of South African government bonds (SAGBs) since the release of the June 2025 FSR, while banking sector exposure to sovereign debt grew at a slower pace. Corporate credit expanded, largely driven by investments in renewable energy and borrowing for working capital purposes, while household borrowing remained subdued. Household debt and debt-service ratios eased slightly but remain above their long-term averages.

The SARB’s key quantitative indicators of domestic financial stability conditions reflect relatively benign levels of systemic risk despite heightened geopolitical tensions and policy uncertainty. In particular, the SARB’s Financial Conditions Index (FCI) shows a steady easing of domestic financial conditions, in the main supported by rising equity prices and lower bond yields, despite some foreign exchange (FX) volatility following the US’s tariff announcement in April 2025. The credit-to-GDP gap, a key indicator of excessive credit growth, turned marginally positive in the first half of 2025, mainly due to stronger corporate credit growth. However, the credit-to-GDP gap – currently at 0.81% – remains well below the 2-percentage-point threshold used as a risk level benchmark.

The SARB identifies key threats to financial stability across three risk categories. For this edition, these are:

• cyclical financial risks: rapid capital outflows amid market uncertainty; deteriorating public sector debt ratios, and increased financial distress among households and small and medium-sized enterprises (SMEs);
• structural and perpetual risks: heightened geopolitical tensions and policy uncertainty; concentration in the financial system, especially banking; persistently low and inequitable economic growth; deteriorating critical infrastructure (electricity, rail, ports and water); climate change impacts on the financial sector; and technology-enabled financial innovation; and
• operational and event risks: potential systemic operational incidents such as cyberattacks or critical infrastructure failures; and remaining on the FATF greylist over the medium term (although this risk dissipated after the FATF announced on 24 October 2025 that South Africa had been removed from the greylist).

Overall, the South African financial system remained resilient, and this resilience is expected to be maintained over the forecast period to November 2026.