FAILURE AND SURVIVAL OF WEST AFRICAN ECONOMIC AND MONETARY UNION BANKS : THE ROLE OF REGULATORY CAPITAL
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Date
2026
Authors
Vigninou Gammadibe
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Journal ISSN
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Publisher
AERC
Abstract
This paper analyzes the contribution of capital and its ownership structure on the failure of WAEMU (West African
Economic and Monetary Union) banks. The study covers 147 banks observed over the period 2003-2017 and is based on
non-parametric, semi-parametric, and parametric survival models. The results of the estimates using the partial maximum
likelihood method show that the capital ratio plays a key role in the survival of banks by significantly reducing the
probability of failure. Findings revealed that they can predict banking difficulties over a time horizon ranging from one to
three years. Foreign ownership seems to reduce the probability of default. The increase in bank capital from 2007 seems
to be accompanied by a faster acceleration of total bank assets as compared to equity. The estimates showed that low
market share is an indicator of banks’ vulnerability. Based on these findings, the paper recommends special supervision of
small and newly established banks with small market shares and better management of banking institutions concerning
capital management and risk-taking. Furthermore, the study urges the regulator to consider the structure of the market
while issuing new licenses, to avoid a highly competitive banking sector that is not conducive to the stability and survival
of banks.