Time: 13:00-15:00 (UK Time), Wednesday, 17 November 2021
(Please kindly note that the UK Time Zone is now changed to GMT)
Presenter: Dr. Peter Wamalwa, Central Bank of Kenya (CBK)
Authors: Peter Wamalwa, Cappitus Chironga, and Anne Kamau, CBK & Samuel Tiriongo, Kenya Bankers Association
Discussants:
Adam Mugume - Executive Director, Research and Policy Directorate, Bank of Uganda
Patrick Hitayezu - Director of the Research Department at the National Bank of Rwanda
Ye Bai - Associate Professor in Finance, Xi'an Jiaotong Liverpool University (XJTLU)
Esmie Kanyumbu - Senior Analyst, Financial Markets Development, Reserve Bank of Malawi & PhD Researcher, Loughborough University
Sherillyn Raga - Senior Research Officer, ODI London
Anosi Ikimimalo - PhD Researcher, SOAS University of London
Chair: Professor Victor Murinde, SOAS University of London
Online venue: Click here to join the seminar on Microsoft Teams (For any inquiry about how to join the online seminar, please contact Dr. Meng Xie: xm1@soas.ac.uk
Abstract
The linkages in the interbank market play a critical role in liquidity distribution in the banking sector, but at the same time may propagate risks. This paper analyses architecture of interbank interconnectedness and its impact on systemic risk in the banking sector of the East African Community (EAC), using bank level data for the period 2010 to 2020. The results indicate that the interbank market is more segmented in Burundi compared to Kenya, Uganda, Tanzania and Rwanda. As a result, banks in Burundi are least susceptible to contagion risk compared to other banks in the EAC countries. Further, there are also linkages among banks in the region due to similarities in the structure of assets and liabilities, income statements and sectoral loan portfolio, which elevates systemic risk. However, heterogeneity of assets and robust economic growth reduce systemic risk, while an increase in capital predisposes the banking sector to systemic risks due to increase in financial linkages. Overall, the main findings suggest there is need to minimize contagion risk in the region through integrating interbank markets, enhancing their efficiency and increasing diversity of assets and liabilities.
Presenter
Dr. Peter Wamalwa is a Kenyan and an economist at the Central Bank of Kenya, with over ten years of undertaking fiscal, monetary and financial policy analysis. He has a B.A. and an M.A. in Economics from University of Nairobi and a PhD in Economics from University of Cape Town. He has facilitated capacity building workshops in time series analysis and macro prudential assessment for policy makers in Africa and at multinational organizations. Prior to joining the Central of Kenya, he was a consultant at the Kenya Institute of Public Policy and Research Analysis (KIPPRA) and a Lecturer at Maseno University. He was also a visiting scholar in 2017 in the African Department of the International Monetary Fund. His research interests are monetary policy, deficit financing, financial markets and asset price stability.