The Sovereign-Bank Nexus in Sierra Leone: Implications for Financial Stability in the Post-COVID Era

Jiren Zhang () and Peter Mugisa ()
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Jiren Zhang: People’s Bank of China
Peter Mugisa: IMF

Chapter Chapter 8 in Navigating Economic Storms and Emerging from Fragility, 2026, pp 91-97 from Springer

Abstract: Abstract This chapter shows the links that banks in Sierra Leone have with the sovereign and how this has developed over time with potential consequences for the stability of the financial system. Recent developments related to the COVID-19 pandemic have led to increased holdings of government debt and hence direct exposure. There is still no fully operational financial safety net that would minimize the need for government intervention in case of problem banks. Additionally, already existing macroeconomic imbalances in the country may cause the sovereign to respond with fiscal adjustment that could also negatively impact bank performance. All these factors contribute to the sovereign-bank nexus which calls for policies to further enhance sovereign debt management, increase capital and liquidity buffers for banks, and strengthen the financial safety net.

Keywords: Sovereign debt exposure; Government securities; Bank capital buffers; Non-performing loans; Deposit protection fund; Basel III implementation; Liquidity risk (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-92147-6_8

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DOI: 10.1007/978-3-031-92147-6_8

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