Global connectivity and resilience in African Banking: Role of technology and regulation

Abstract

This study emphasizes three solid questions: (i) the extent to which African banking systems are globalized; (ii) the role of regulation and technology in this process; and (iii) whether economic globalization reinforces banking stability. We conceptualize financial globalization through two symbiotic dimensions; connectivity and resilience, both affected by technological and regulatory designs. Covering 21 African nations and five major global economies, we employ comovement analysis (2000–2023), generalized impulse response functions, and System-GMM (2010–2023). We found strong comovement between African and global banks, especially during the 2007/08 global financial crisis, followed by partial decoupling in its aftermath. Yet, African banks tend to be highly reactive to world liquidity conditions. Financial technology has a dual role: automated teller machine proliferation fosters cross-border activity, whereas mobile banking, though active for domestic inclusion, did less as a global connector due to infrastructural and regulatory curbs. Regulatory capital cushions, chiefly Tier 1 ratios, favor both stability and integration by lowering risk and refining solvency. Trade openness, one facet of economic globalization, also upholds banking stability through greater risk diversification. We suggest adaptive regulatory approaches, like sandbox outlines, and especial support for smaller African banks, for more inclusive and sustainable integration into global financial markets. Future research must expand on regulatory on scope to capture institutional asymmetry and incipient risks within Africa’s finance.