The Impact of Exchange Rate Volatility on Credit Risk in South African Banking Portfolios

Credit risk



Exchange rate, credit risk, cointegration, information asymmetry, South Africa


Macroeconomic shocks affect loan defaults in the credit markets. The South African rand has been volatile with low economic growth and high unemployment. Time series data from 2008Q1-2018Q4 was used to determine the impact of exchange rate on credit risk in South African banking portfolios. Cointegration and error correction model were applied to determine the impact of selected macroeconomic variables on credit risk. Macroeconomic shocks significantly affect bank asset quality. A 1% increase in exchange rate increases impaired loans by 0.57%. Banking sector stability is essential; hence, policymakers should understand macroeconomic fundamentals that significantly affect bank asset quality.

Author Biographies

Margaret Rutendo Magwedere, University of South Africa

Dr. Margaret Rutendo Magwedere is a Postdoctoral Fellow in the Department of Finance, Risk Management and Banking.

Joseph Chisasa, University of South Africa

Prof Joseph Chisasa is a professor in the Department of Finance, Risk Management and Banking.


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How to Cite

Magwedere, M. R., & Chisasa, J. (2023). The Impact of Exchange Rate Volatility on Credit Risk in South African Banking Portfolios: Credit risk. Acta Universitatis Danubius. Œconomica, 19(2), 300–314. Retrieved from



Financial Economics