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We propose a toolkit for the assessment of systemic risk buildup in low income countries. We show that, due to non-linearity in the relationship between credit and financial stability, the assessment should be conducted with different tools at different stages of financial development. In particular, when the level of financial depth is low, traditional leading indicators of banking crises have poor predictive performance and the analysis should be based on indicators that account for financial deepening while taking into consideration countries’ structural limits. By using this framework, we provide a preliminary assessment of systemic risk buildup in individual SSA countries.

Financial crises --- Financial risk management --- Risk management --- Macroeconomics --- Economics: General --- International Economics --- Money and Monetary Policy --- Finance: General --- Financial Risk Management --- Foreign Exchange --- Informal Economy --- Underground Econom --- Financial Markets and the Macroeconomy --- Financial Crises --- Financial Forecasting and Simulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- General Financial Markets: Government Policy and Regulation --- Economic & financial crises & disasters --- Economics of specific sectors --- Monetary economics --- Finance --- Economic sectors --- Credit --- Money --- Financial sector development --- Financial markets --- Systemic risk --- Financial sector policy and analysis --- Credit booms --- Currency crises --- Informal sector --- Economics --- Financial services industry --- Nigeria

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Banking in SSA has undergone very significant changes over the last two decades. Financial liberalization and related reforms, upgrades in institutional and more recently the expansion of cross-border banking activities and the rapid development of Pan-African banking groups are signaling greater financial integration and significant changes in the African banking and financial landscape. Nonetheless, excess liquidity in many countries reflects limited lending opportunities and, despite improvements, asset quality and provisioning remain comparatively low. Dollarization has also been a persistent characteristic in several natural resource-dependent economies. This paper discusses key stylized facts and trends of banking development in SSA, looking at a variety of dimensions such as size, depth, soundness, and efficiency. It also assess the rapid expansion of pan-African banking groups, which have overtaken the role of the European and U.S. banks that had traditionally dominated banking activities in SSA, creating significant cross-border networks and becoming the largest participants in new syndicates and large bilateral loans to finance infrastructure development.

Banks And Banking --- Africa --- Business & Economics --- Political Science --- Banks and Banking --- Finance: General --- Money and Monetary Policy --- General Financial Markets: Government Policy and Regulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Financial Markets and the Macroeconomy --- Financial services law & regulation --- Banking --- Monetary economics --- Finance --- Basel II --- Foreign banks --- Bank credit --- International Financial Reporting Standards --- Financial regulation and supervision --- Financial sector development --- Financial markets --- Financial institutions --- Money --- Banks and banking --- State supervision --- Banks and banking, Foreign --- Credit --- Financial services industry --- South Africa