Coping with Falling Oil Prices: The Different Fortunes of African Banks

29 Pages Posted: 10 Jul 2019

See all articles by Cheikh Anta Gueye

Cheikh Anta Gueye

International Monetary Fund (IMF)

Asithandile Mbelu

Trinity College (Dublin)

Amadou Nicolas Racine Sy

International Monetary Fund (IMF) - International Capital Markets Department; Brookings Institution

Date Written: June 2019

Abstract

This paper studies the impact of declining oil prices on banks in sub-Saharan African oil-exporting countries. Results indicate that banks respond differently to an oil shock depending on their ownership: (i) domestic banks are the most adversely impacted and experience a deterioration in asset quality and liquidity; (ii) foreign-owned banks are the most resilient as they are able to improve asset quality and attract deposits but at the same time, they decelerate credit growth; in contrast, (iii) Pan-African Banks help stabilize overall credit but large banks in that segment experience reduced asset quality. These differentiated results suggest a tradeoff between maintaining credit growth and safeguarding financial stability in an oil slump which could be addressed by both micro- and macroprudential policies.

Keywords: Bank credit, Commodity price shocks, Oil prices, Oil revenues, Oil exporting countries, Oil price, non-performing loans, credit growth, deposit growth, bank ownership, bank characteristics, domestic banks, foreign-owned banks, Pan-African banks, sub-Saharan Africa., foreign-owned bank, domestic bank, oil price decline, oil price shock, NPL

JEL Classification: F62, F65, F68, G21, E01, Q, Q02, O13, Q35

Suggested Citation

Gueye, Cheikh Anta and Mbelu, Asithandile and Sy, Amadou Nicolas Racine, Coping with Falling Oil Prices: The Different Fortunes of African Banks (June 2019). IMF Working Paper No. 19/129, Available at SSRN: https://ssrn.com/abstract=3417722

Cheikh Anta Gueye (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Asithandile Mbelu

Trinity College (Dublin) ( email )

2-3 College Green
Dublin, Leinster D2
Ireland

Amadou Nicolas Racine Sy

International Monetary Fund (IMF) - International Capital Markets Department ( email )

700 19th Street NW
Room 9-548
Washington, DC 20431
United States
202-623-8651 (Phone)
202-589-8561 (Fax)

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

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