Bank regulation, cross-border banking and interest rate pass- through in Sub-Saharan Africa
Date
2023-03
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of the Witwatersrand, Johannesburg
Abstract
The thesis comprises five interrelated chapters that seek to advance empirical literature on banking and financial sector stability (risk) by focusing on some salient regulatory and monetary issues of policy relevance and interest to developing countries of Sub-Saharan Africa (SSA). The market structure and regulatory environment in which banks operate in SSA have significantly changed over the last two decades, and the banking systems of a number of countries have also markedly grown during this period. For instance, and especially after the global financial crisis (GFC), supervisory authorities in most countries introduced new regulations, and/or in some cases, enhanced their existing bank regulatory frameworks to conform with international best practice and standards. However, questions have been raised as to whether developing countries like those in SSA need to adopt international regulatory standards indiscriminately – and whether the benefits arising from the adoption of such policies or standards outweigh the costs. At the same time, the SSA region has witnessed significant penetration of foreign banks – a development that has heightened the risk of financial contagion and cross-border spill over effects. In most countries, there have also been considerable changes in the design and implementation of monetary policy over the past two decades. These changes have triggered a considerable debate on whether and how regulatory and structural factors in the financial system impede or facilitate monetary policy
transmission – a debate that, as yet, is not fully settled.
This study interrogates the above issues by focussing on three related questions. First, how do regulations – that are based on international best practice and standards, impact or shape risk- taking behaviour (i.e. stability) of banks in SSA? Second, what are the banking sector stability implications of increased foreign bank penetration in the host countries? Finally, how does competition and capital regulation affect the transmission of monetary policy to commercial banks’ lending and deposit rates i.e. the interest rate pass-through (IRPT) in SSA? In addressing each question, the study applied panel econometric analyses using bank and country-level data. The data was obtained from various sources, namely; Bankfocus database, the World Bank Regulatory and Supervision Surveys (BRSSs), IMF International Financial Statistics (IFS), IMF Financial Soundness Indicators (FSIs), World Bank Governance Indicators (WBGIs), Global Financial Development Database (GFDD, 2019), and The Heritage Foundation.
Description
A thesis submitted to the Faculty of Commerce, Law and Management, in fulfillment of the requirements for the Degree of Doctor of Philosophy in Economics, University of the Witwatersrand, Johannesburg, 2023
Keywords
Bank stability, Bank regulation, Cross-border banking, Interest rate pass-through, UCTD
Citation
Gondwe, Sopani. (2023). Bank regulation, cross-border banking and interest rate pass- through in Sub-Saharan Africa [Master’s dissertation, University of the Witwatersrand, Johannesburg]. WireDSpace. https://hdl.handle.net/10539/38809