Assessing the Systemic Importance of Banks in Rwanda using Portfolio Similarity and Clustering Methods

Dominique Ntirushwamaboko, Mugenzi Patrick and Nyalihama Christian

Working Papers from African Economic Research Consortium

Abstract: This paper assesses the similarity among Rwandan banks, especially looking at how the assets side and lending portfolios have been evolving, and their implications on systemic risks in the Rwandan banking system. The aim was to gauge a systemic risk that might originate from a cluster(s) of small banks, which is not well captured by traditional means of using the size or interconnectedness in network analysis. We used a variety of empirical approaches to tackle this aspect in the context of Rwanda, with data from 2016 to 2019. Our key findings suggest that the general measure of the portfolio similarity between individual banks is quite stable over time and driven predominantly by big banks. Conversely, we noted that some medium-sized banks have been consistently similar in terms of the loan portfolio and associated risks in the last four years, and therefore they can be exposed to common risks with impactful consequences, as the cluster is more sizeable than banks have taken individually

Date: 2021-11-18
Note: African Economic Research Consortium
References: Add references at CitEc
Citations:

Downloads: (external link)
https://publication.aercafricalibrary.org/handle/123456789/3213 (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:aer:wpaper:810c6ce2-d0a0-400a-b5a4-c6e4172e7998

Access Statistics for this paper

More papers in Working Papers from African Economic Research Consortium Contact information at EDIRC.
Bibliographic data for series maintained by Daniel Njiru ().