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The Impact of Derivatives Use on Systemic Risk of Africa’s Banking System

The Impact of Derivatives Use on Systemic Risk of Africa’s Banking System This paper contributes to the debate about Africa’s financial stability by focusing on the prevalence of systemic risk in 40 listed derivatives user-banks over 2011–2017, employing the systemic risk index (SRI), and subsequently exploring how it links to the continent’s financial market development. The systemic risk buildup within the industry is mainly depicted as an unstable, diluted, and possibly depleting process. Gloomy predictions persist in the subsequent attempts to uncover plausible causes of systemic risk formation. Mainly, conventional defining factors for risk exhibit irrelevance toward systemic risk development, as threats to financial stability remain confined within the industry, supported by a lack of diversification in financial services. The investigated markets may be individually subject to internal vulnerabilities that could be exacerbated by financial shocks, feedback effects, and the likelihood of contagion and failure among financial institutions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of African Business Taylor & Francis

The Impact of Derivatives Use on Systemic Risk of Africa’s Banking System

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The Impact of Derivatives Use on Systemic Risk of Africa’s Banking System

Abstract

This paper contributes to the debate about Africa’s financial stability by focusing on the prevalence of systemic risk in 40 listed derivatives user-banks over 2011–2017, employing the systemic risk index (SRI), and subsequently exploring how it links to the continent’s financial market development. The systemic risk buildup within the industry is mainly depicted as an unstable, diluted, and possibly depleting process. Gloomy predictions persist in the subsequent attempts...
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Publisher
Taylor & Francis
Copyright
© 2023 Taylor & Francis Group, LLC
ISSN
1522-9076
eISSN
1522-8916
DOI
10.1080/15228916.2023.2185431
Publisher site
See Article on Publisher Site

Abstract

This paper contributes to the debate about Africa’s financial stability by focusing on the prevalence of systemic risk in 40 listed derivatives user-banks over 2011–2017, employing the systemic risk index (SRI), and subsequently exploring how it links to the continent’s financial market development. The systemic risk buildup within the industry is mainly depicted as an unstable, diluted, and possibly depleting process. Gloomy predictions persist in the subsequent attempts to uncover plausible causes of systemic risk formation. Mainly, conventional defining factors for risk exhibit irrelevance toward systemic risk development, as threats to financial stability remain confined within the industry, supported by a lack of diversification in financial services. The investigated markets may be individually subject to internal vulnerabilities that could be exacerbated by financial shocks, feedback effects, and the likelihood of contagion and failure among financial institutions.

Journal

Journal of African Business – Taylor & Francis

Published: Mar 3, 2023

Keywords: Derivatives use; African banking market; systemic risk contribution; systemic risk sensitivity; systemic risk index

References

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