Pan-African banks, banking interconnectivity: A new systemic risk measure in the WAEMU
Loading...
Date
2021-07-04
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
Abstract
This paper examines the existence of potential systemic risk in the banking sector of the West African Economic and Monetary Union (WAEMU) by using hand-collected bank-level data from all WAEMU countries for 2000–2017. One original aspect of our paper is the estimation of probabilities of default, in conjunction with the CIMDO method (Consistent Information Multivariate Density Optimizing) and the use of clustering techniques. We find that most of the banks have a very low probability of default, but there is a high joint probability of default for most pairs of banks. Therefore, there are seeds of systemic risk in the WAEMU: if the financial strength of large banking groups deteriorates, there could be contagion effects that could weaken the union. The use of quantile estimation has helped to determine banks’ characteristics that may explain the systemic risk.
Description
Journal of International Financial Markets, Institutions and Money, Volume 74
Keywords
Cross-border banking groups, Systemic risk, CIMDO, Clusters, WAEMU, École Nationale Supérieure de Statistique et d'Economie Appliquée d'Abidjan (ENSEA), Social Science
Citation
Saidane, D., Sène, B., & Kanga, K. D. (2021). Pan-African banks, banking interconnectivity: A new systemic risk measure in the WAEMU. Journal of International Financial Markets, Institutions and Money, 74, 101405.