Leading Internal and External Sources of Credit Risk in the Top Cameroonian Banks

The  idea  behind  investigating  the  leading  external  and  internal  indicators  of  credit  risk  is premised on the proposal that banks have an important role in the economy. The relationship between banks and the economy is driven by the role of banks which many researchers are in agreement that banks assume the financial intermediation role in the economy (Allen & Carletti, 2008; Boot & Marinc, 2008; Delibasic, 2008 and Wilson et al., 2010).
For  Delibasic  (2008),  banks  become  financial  intermediaries  when  they  finance  different business activities in the economy. To be able to finance different activities as suggested by Delibasic (2008), Allen and Carletti (2008) state that banks collect demandable deposits to raise funds in the short term and invest these funds in long term assets (i.e. loans to different sectors of the economy). Allen and Carletti (2008) refer to the transformation of deposits into loans as a “maturity transformation role” of banks in the economy.
Based on this relationship, it is clear that any instability in the banking system would result in instability within other sectors of the economy, thus impacting the growth of the economy. Banque de France (2008) support this statement and state that banks assume an important role in the financing of economies and in their view, should banks be unable to perform their assumed position (financing function) the economic growth of a country will be compromised.
Within this knowledge, I have undertook an research aimed at identifying the leading credit risk indicators in the Camerronian banking context as well as the development of an integrated leading credit risk indicator model. A content analysis was used as a data extraction methodology and structural equation modelling was used as a data analysis methodology. The results obtained indicated that utilising the structural equation modelling, gross savings, and prime overdraft rates, number of judgements, business insolvencies and  unemployment  rates  were  formulated  as leading  economic  and  market (external) indicators of credit risk in the South African banking context. Similarly, utilising the principal  component  analysis,  bank  asset  quality,  bank  asset  concentration  as  well  as  bank trading and hedging activities were formulated as leading bank specific (internal) indicators of credit risk in the South African banking context. The Integrated Leading Credit Risk Indicator Model (ICRIM) was formulated utilising the accepted leading credit risk indicators. The ICRIM parameters were benchmarked against the generally accepted fit indices such as the RMSEA, comparative fit (baseline comparison) as well as the Hoelter and its results output were found to be consistent with these generally accepted fit indices.

Macroeconomic Factors and Dynamics of Financial Deepening: An empirical Investigation applied to the CEMAC Sub-region

Most studies agree on the fact that the CEMAC  sub-region countries in particular have an underdeveloped financial system and more precisely, with a shallow depth. The results of several research projects, particularly the one of Meisel and Mvogo (2007) highlight the need to take the problem of low financial depth in the sub-region seriously compared to other aspects of financial development. Through an estimate of financial development level in the countries of the franc zone, they have found that the most problematic aspect due to its low degree is financial deepening. Their results allow for deducing the fact that the financial development problem in the CEMAC zone could be reduced to financial deepening problems rather than other financial development aspects.
In the world, financial system has always played an important role in supporting economic activity. Indeed no need for a complex analysis to see what is obvious: all developed countries have one thing in common which is a developed financial system. Moreover in the world and especially sub-Saharan Africa countries, several empirical investigations (Ndebbio, 2004; Odiambho, 2006; Gries et al., 2011 ... etc.] confirmed a positive influence of financial deepening and bank development on economic growth per capita.
If we consider the results of these theoretical and empirical investigations, we can conclude the importance of low financial depth as a current issue in the CEMAC zone. The handling of this major concern assumes that we may be able to list and quantify the actual determinants of financial deepening in the sub region through theoretical and empirical investigation; additionally the analysis of dynamic behavior at the individual level of financial deepening in the sub-region would be of great help for the formulation of harmonized financial policies.
Considering this, I have empirically estimates a micro-founded model with the aims to investigate the leading macroeconomic determinants and dynamics of financial deepening in the CEMAC sub-region. For this purpose, I adopted an empirical investigation in both static and dynamic panel data econometrics which has led to the following global recommendations: firstly, the CEMAC sub-region authorities should implement expansionary policies of GDP growth rate, population density, savings rate and exchange rate. Secondly, they should review their policy of trade liberalization since it appears to be negatively related to financial deepening. Concerning the dynamics aspect, a convergent dynamics and the feasibility of common monetary policy targeting depth in CEMAC sub-region have been highlighted.