Coping with Falling Oil Prices: The Different Fortunes of African Banks
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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.
Series:
Working Paper No. 2019/129
Subject:
Banking Credit Financial institutions Foreign banks Government securities Money Nonperforming loans Oil prices Prices
English
Publication Date:
June 17, 2019
ISBN/ISSN:
9781498317795/1018-5941
Stock No:
WPIEA2019129
Pages:
28
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