Coping with Falling Oil Prices: The Different Fortunes of African Banks
IMF Working Papers, June 17, 2019
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- Coping with Falling Oil Prices: The Different Fortunes of African Banks
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Bibliographic details
- Authors: Cheikh A. Gueye, Asithandile Mbelu, Amadou N Sy
- Published: June 17, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498317795.001
Study scope and methodology
- Topic: Impact of declining oil prices on banks in sub-Saharan African oil-exporting countries.
- Authors: Cheikh A. Gueye, Asithandile Mbelu, Amadou N Sy
- Date: June 17, 2019
- Series: IMF Working Papers, Working Paper No. 2019/129
- DOI: https://doi.org/10.5089/9781498317795.001
Major empirical findings
- Ownership-dependent bank responses to an oil shock:
- Domestic banks:
- Most adversely impacted.
- Experience a deterioration in asset quality and liquidity.
- Foreign-owned banks:
- Most resilient.
- Improve asset quality and attract deposits.
- Decelerate credit growth.
- Pan-African Banks:
- Help stabilize overall credit.
- Large banks in this segment experience reduced asset quality.
- Implied tradeoff:
- Results suggest a tradeoff between maintaining credit growth and safeguarding financial stability during an oil slump.
Policy implications and recommendations
- Microprudential policies:
- Target bank-level vulnerabilities linked to ownership type (domestic, foreign-owned, Pan-African).
- Macroprudential policies:
- Address system-wide tradeoffs between credit provision and financial stability in response to oil price shocks.
- Combined approach:
- Both micro- and macroprudential policies are indicated to manage the tradeoff and heterogenous bank responses.
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