The current global financial crisis will have an impact on the banking sector, the Banking Association SA (Basa) said on Tuesday.

"Although we'll see an impact, our banking sector is fundamentally sound," said Basa managing director Cas Coovadia.

"We believe that there is appropriate regulation in the sector, and the legacy of exchage controls and phasing them out gradually has protected us somewhat."

He said there would be "grim over-indebtedness" in the sector next year, but Basa would work with the broader credit industry.

"[T]he concentration will be on restructuring, instead of pushing matters into the legal system and we hope that people will meet us halfway."

Coovadia said impairments were still relatively low.

"In the first six months of 2008, Standard Bank reported impairments of 1.27 percent, Absa 0.93 percent and Nedbank 0.96 percent."

Coovadia said the country's banks were well capitalised and their funding strong. The largest four banks had total assets outside the country of R600 billion. Exposure to sub-prime portfolios was minimal, he said.