EconPapers    
Economics at your fingertips  
 

Understanding bank demand for sovereign debt and its systemic risk implications: The Kenyan experience

Rogers Ochenge

No 88, KBA Centre for Research on Financial Markets and Policy Working Paper Series from Kenya Bankers Association (KBA)

Abstract: This study investigates the demand for government securities by Kenyan banks using annual data from 2005 to 2022. Employing a fixed-effects panel regression model, the research examines the factors influencing banks' sovereign debt holdings and their implications for systemic risk. Key findings reveal that fiscal deficits, attractive bond yields, and capital adequacy requirements significantly drive banks' appetite for government securities. Over time, the similarity in sovereign holdings across banks has increased, raising concerns about systemic risk due to potential correlated exposure to sovereign debt shocks. The study also identifies a negative relationship between private sector lending and sovereign debt holdings, highlighting potential "crowding out" effects. These insights are critical for informing regulatory policies aimed at mitigating systemic risks in the Kenyan banking sector

Keywords: Government paper; Bank; Systemic risk; Kenya (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-afr
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/316414/1/1923637908.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:kbawps:316414

Access Statistics for this paper

More papers in KBA Centre for Research on Financial Markets and Policy Working Paper Series from Kenya Bankers Association (KBA)
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2025-06-14
Handle: RePEc:zbw:kbawps:316414