Bank lending behaviour and systemic banking crisis in Africa: The role of regulatory framework

Abstract

We examine how regulatory framework shapes the impact of bank lending behaviour on the probability of systemic banking crisis by using data from 52 African countries over the period 2006–2018. The study found that banks that lend beyond a certain level of threshold have the greater probability of causing a systemic banking crisis. The study provides empirical evidence in support of the argument that Above-average lending behaviour reduces the predicted probability of a systemic banking crisis in the presence of audit independence, stringent capital regulatory requirements, central bank independence and monetary policy framework.