The central bank of Angola is reportedly planning to shut down all defaulting lenders in case they fail to achieve minimum capital requirement levels.

In an interview to Bloomberg, Angola’s central bank governor Jose Lima de Massano said that the some of the institutions may lose their banking licence if they do not increase their capital with accordance to their loan portfolio.

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This month, the central bank has revoked banking licences of two banks.

Angola banking sector turmoil: Background

The banking sector of the oil-producing nation has been severely affected due to increasing bad loans, after the drop in crude prices.

According to Fitch Solutions, bad loans made up 27% of all lenders’ debt in November last year as against 10% on average between 2013 and 2016.

In the second quarter of this year, the central bank will carry out an asset review of the 27 lenders of the country. It is expected to be completed by September 2019.

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Following the review, the National Bank of Angola may revoke the licences of the defaulters.

Massano told the publication: “Our biggest concern is not so much the number of banks. We are focused on ensuring that the funds held by banks are secure.”

However, the governor also appreciated the efforts made by the banks to report impairments to mitigate loan-related risks.

As a part of the banking reforms, the National Bank of Angola is also planning to implement stricter anti-money laundering and anti-terrorism financing laws.

Listing part of the key lenders capital and re-establishing ties with foreign banks are also under consideration, Massano told Bloomberg.