To make matters worse, some banks began to 'securitize' (package) these mortgages as investments and sell them off to other banks and/or investors. These 'asset' backed mortgages offered attractive yields (provided the borrower remained true to contract) and became known as 'toxic assets'. If a bank (which most of them did) had some of these assets on their books, they virtually became worthless overnight and left the bank with far bigger debt problems than capital security and hence, for the unfortunate few, had to close shop.

In conclusion, although there is a huge amount of uncertainty regarding the state of financial institutions globally, this has largely been as a result of poor business practice as opposed to market forces or any adverse business cycle. Therefore, the question of a lag time for it to impact here is not one that requires exploration. South African banks are in a far healthier state than many of their global counterparts and are less likely to fail.

acsis Limited is an authorised financial services provider. The response to the question covers some of the issues in a general and factual manner and does not constitute advice. It is important to consult with a financial planner who, after an analysis of the individuals? personal needs, goals and circumstances, will be able to provide comprehensive and appropriate advice.

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