Impact of Market Concentration on the Stability of the Banking Sector in the Central African Economic and Monetary Community (CEMAC)

Charles Alexis Bouity,Pierre Ghislain Batila Ngouala Kombo,Jacques Hakizimana

doi:10.4236/me.2021.125049

Charles Alexis Bouity, Pierre Ghislain Batila Ngouala Kombo + Show 1 more

Open Access

https://doi.org/10.4236/me.2021.125049

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Journal: Modern Economy	Publication Date: May 7, 2021
License type: CC BY 4.0

Abstract

The objective of this paper is to analyze the impact of banking market concentration on the stability of the banking sector in the Economic Community of Central African States (CEMAC). Using panel data from 2005 to 2015 and the system GMM technique, it is found that deposit and credit market concentration have a destabilizing effect on the banking system. Thus, it would be desirable to put in place mechanisms that can help reduce the market power of certain banks to guarantee banking stability.

Highlights

Open AccessThe subprime crisis of 2007-2008 has attracted renewed interest in the analysis of the factors that can influence the financial stability of a banking market
The question that arises from the above developments is as follows: What is the impact of banking market concentration on the stability of the CEMAC banking system? In light of this concern, this article aims to analyze the impact of banking market concentration on the stability3 of the CEMAC banking system
Financial stability is a function of banking market concentration and other factors that can explain the stability of the banking system

Summary

Introduction

The subprime crisis of 2007-2008 has attracted renewed interest in the analysis of the factors that can influence the financial stability of a banking market The magnitude of this crisis and its negative effects on some of the world’s economies have highlighted the need for monetary authorities to strengthen financial system stability. According to the OECD2 (2010), during this crisis, countries with more concentrated banking sectors (Australia and Canada) or relatively concentrated banking sectors (France) were not severely affected, while countries with low banking sector concentration (Germany) were severely affected These differences in the effects of the crisis reflect the divergence in the literature on the effects of banking concentration on financial stability

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