Coping with Falling Oil Prices: The Different Fortunes of African Banks

By Cheikh A. Gueye, Asithandile Mbelu, Amadou N Sy

June 17, 2019

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Cheikh A. Gueye, Asithandile Mbelu, and Amadou N Sy. Coping with Falling Oil Prices: The Different Fortunes of African Banks, (USA: International Monetary Fund, 2019) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper studies the impact of declining oil prices on banks in sub-Saharan African oil-exporting countries. Results indicate that banks respond differently to an oil shock depending on their ownership: (i) domestic banks are the most adversely impacted and experience a deterioration in asset quality and liquidity; (ii) foreign-owned banks are the most resilient as they are able to improve asset quality and attract deposits but at the same time, they decelerate credit growth; in contrast, (iii) Pan-African Banks help stabilize overall credit but large banks in that segment experience reduced asset quality. These differentiated results suggest a tradeoff between maintaining credit growth and safeguarding financial stability in an oil slump which could be addressed by both micro- and macroprudential policies.

Subject: Banking, Credit, Financial institutions, Foreign banks, Government securities, Money, Nonperforming loans, Oil prices, Prices

Keywords: Bank, Bank characteristic, Bank characteristics, Bank control, Bank ownership, Credit, Credit growth, Deposit growth, Domestic banks, Foreign banks, Foreign-owned banks, Government securities, Non-performing loans, Nonperforming loans, Oil price, Oil price growth, Oil price shock, Oil prices, PAB bank, Pan-African banks, Price, Sub-Saharan Africa, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/129
Stock No:

WPIEA2019129
ISBN:

9781498317795
ISSN:

1018-5941

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