Coping with Falling Oil Prices: The Different Fortunes of African Banks
Author | : Cheikh A. Gueye |
Publisher | : International Monetary Fund |
Total Pages | : 28 |
Release | : 2019-06-17 |
Genre | : Business & Economics |
ISBN | : 1498317790 |
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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.