By Vigninou Gammadigbe

Summary:

Unlike earlier studies on the impact of COVID-19, which focused on monitoring macroeconomic aggregates and prudential ratios during the crisis, this paper analyzes the path through which the crisis impacted the banking sector, using a fixed-effects panel VARX model and a network model covering the 2019-2021 period.

The study's findings confirm the overall soundness of WAMU's banks, despite a decline in economic activity during the COVID-19 crisis. According to the study, their resilience was fostered by reforms implemented prior to the pandemic as well as by emergency measures taken during the crisis by the Central Bank.

In light of those findings, the study calls for the continued vigorous implementation of such measures and closer monitoring of systemically important and most vulnerable banks.

This study also allows readers to gain an appreciation of the mechanisms used by the Central Bank to help protect the banking system from the harmful consequences of the COVID-19 pandemic.