How has the rise of Pan-African banks impacted bank stability in WAEMU?

Désiré Kanga, Victor Murinde and Issouf Soumaré

Journal of International Financial Markets, Institutions and Money, 2021, vol. 73, issue C

Abstract: We investigate the impact of the recent rise of Pan-African banks, which are indigenous African banks with cross-border networks, on banking sector stability within the West African Economic and Monetary Union (WAEMU). We contextualise this problem in terms of the long-standing unresolved controversy in the banking literature, between the competition-stability hypothesis and the competition-fragility hypothesis. We test the hypotheses using hand-collected bank-level data from all WAEMU countries for 2000–2017. We uncover new evidence that the increase in competition, engendered by the entry of Pan-African banks, is associated with an increase in banking stability as well as an increase in banking fragility – it all depends on the origin of banks in WAEMU. Specifically, the expansion of Pan-African banks into the WAEMU banking system is consistent with the competition-fragility hypothesis, while the presence of French banks in WAEMU supports both hypotheses. Overall, bank profit is the main mechanism through which competition is associated with an increase in banking fragility in WAEMU.

Keywords: Bank competition; Banking fragility; Banking stability; Pan-African banks; WAEMU (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:73:y:2021:i:c:s1042443121000834

DOI: 10.1016/j.intfin.2021.101364

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