This first issue of the series "COFEB ABrégés" refers to the Study and Research Document (DER) N°COFEB /DER/2020/01, written by Vigninou GAMMADIGBE, in December 2020, on the theme " Systemic and Contagion Risks in the WAEMU Banking System : A Network Analysis and Proposition of an Index ".

Financial stability is one of the major concerns of the Authorities of WAEMU. To address this issue, the BCEAO established a macroprudential supervision framework based on Financial Soundness Indicators (FSI), on stress tests (STs), and the identification and monitoring of Systemically Important Banking Institutions (SIBs). The research initiated by Mr. GAMMADIGBE completes this toolbox with two other instruments allowing to evaluate the fragility, contagiousness and vulnerability of credit institutions in the Economic Union. The methodology is based on a network analysis model of the Systemic Risk and Contagion (SRC) and a Systemic Risk and Contagion Index (SRCI).

The study seeks to identify the interconnection mechanisms between banks within the system and, on this basis, to simulate the contagion effects that could occur in the event of the failure of one of the banks. The results shows that the size of a bank (market share) is less important than its interconnections in assessing its systemic character. They also highlight the importance of capital and bank liquidity in the liquidity in the resilience mechanism of banks to systemic risk.