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Pan-African banks, banking interconnectivity: A new systemic risk measure in the WAEMU

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  • Saidane, Dhafer
  • Sène, Babacar
  • Désiré Kanga, Kouamé

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.

Suggested Citation

  • Saidane, Dhafer & Sène, Babacar & Désiré Kanga, Kouamé, 2021. "Pan-African banks, banking interconnectivity: A new systemic risk measure in the WAEMU," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:intfin:v:74:y:2021:i:c:s1042443121001220
    DOI: 10.1016/j.intfin.2021.101405
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    3. Liubov Lysiak & Iuliia Masiuk & Anatolii Chynchyk & Olena Yudina & Oleksandr Olshanskiy & Valentyna Shevchenko, 2022. "Banking Risks in the Asset and Liability Management System," JRFM, MDPI, vol. 15(6), pages 1-18, June.
    4. Kanga, Désiré & Soumaré, Issouf & Amenounvé, Edoh, 2023. "Can corporate financing through the stock market create systemic risk? Evidence from the BRVM securities market," Emerging Markets Review, Elsevier, vol. 55(C).
    5. Sopani Gondwe & Tendai Gwatidzo & Nyasha Mahonye, 2025. "Cross-border banking and bank stability: evidence from Sub-Saharan Africa," Journal of Banking Regulation, Palgrave Macmillan, vol. 26(2), pages 196-213, June.
    6. Marcelin, I. & Sun, W. & Teclezion, M. & Junarsin, E., 2022. "Financial inclusion and bank risk-taking: the effect of information sharing," Finance Research Letters, Elsevier, vol. 50(C).
    7. Babo Amadou Ba & Mohamed Lamine Mbengue, 2021. "The effectiveness of prudential regulations in the light of the Basel agreements: the case of banks in the WAEMU zone," Post-Print hal-04968725, HAL.

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