Banking Stability Determinants in Africa

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: This study investigates the determinants of banking stability in Africa. We present four measures of banking stability embedding banks’ loan loss coverage ratio, insolvency risk, asset quality ratio, and level of financial development, thereby allowing analysis of banking stability determinants from four complementary perspectives: protection for downside credit losses, distress arising from insolvency risk, non-performing loans, and financial development. The findings indicate that banking efficiency, foreign bank presence, banking concentration, size of banking sector, government effectiveness, political stability, regulatory quality, investor protection, corruption control and unemployment levels are significant determinants of banking stability in Africa and the significance of each determinant depends on (i) the banking stability proxy employed (ii) and depends on the period of analysis: pre-crisis, during-crisis or post-crisis. The results highlight the importance of institutional quality for banking stability in Africa. Banking supervisors in African countries should consider the role of financial structure and institutional quality for banking stability in the African region.

Keywords: Financial Structure; Banking stability; Institutional Quality, Financial Institutions, Bank Performance. (search for similar items in EconPapers)
JEL-codes: G1 G15 G2 G21 G28 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (32)

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Journal Article: Banking stability determinants in Africa (2018)
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