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

Cheikh Gueye, Asithandile Mbelu and Amadou Sy

No 2019/129, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; oil price growth; bank; price; oil price shock; Oil price; non-performing loans; credit growth; deposit growth; bank ownership; bank characteristics; domestic banks; foreign-owned banks; Pan-African banks; sub-Saharan Africa; PAB bank; bank control; bank characteristic; Oil prices; Nonperforming loans; Credit; Government securities; Foreign banks (search for similar items in EconPapers)
Pages: 28
Date: 2019-06-17
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Citations: View citations in EconPapers (1)

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