The paper finds that supervisory stress tests are conducted in more than half of sub-Saharan African countries, particularly in western and southern Africa, and that the number of individual stress tests has grown exponentially since the early 2010s. By contrast, few central banks publish assessments of macro-financial linkages; the focus leans more toward discussing trends and weaknesses within the financial sector than on outside risks that may negatively affect its performance.

Central banks have become part of our modern life. Understanding their operations and policies is important, even to a layperson. At the core of their mission is financial stability. The stress test is one of the tools that Central Banks (or monetary authorities) use to assess how sound commercial banks are within their jurisdictions at any point in time. Bank stress testing is designed to test the resilience of banks to severe but plausible shocks. These scenarios are conceived around a fall of asset prices, a shock to interest rates, a reassessment of risk premiums or a large depreciation to correct an external imbalance. Nonetheless, passing a stress test does not provide a blind assurance that a financial institution is safe and outside the reach of collapse. This book aims to educate on the risks tested and the methods often used in stress testing. It is the first book in its field to make a comprehensive and up-to-date analysis of stress testing, including climate risk.

Using a newly-compiled dataset of state-owned enterprises in Sub-Saharan Africa, we present aggregate information about profitability, liquidity and leverage. We find that 40 percent of the close to 300 surveyed SOEs are unprofitable, while larger firms also tend to be illiquid and overleveraged. In cross-sectional regressions we find that SOE debt stock sustainability is impacted by firms’ profitability and liquidity, while macroeconomic factors cannot be shown to matter, expect for some governance variables. Based on these findings and citing country examples, we also illustrate that weak SOE performance may have a macrofinancial impact affecting bank soundness through delinquent loan exposures.

FinTech is a major force shaping the structure of the financial industry in sub-Saharan Africa. New technologies are being developed and implemented in sub-Saharan Africa with the potential to change the competitive landscape in the financial industry. While it raises concerns on the emergence of vulnerabilities, FinTech challenges traditional structures and creates efficiency gains by opening up the financial services value chain. Today, FinTech is emerging as a technological enabler in the region, improving financial inclusion and serving as a catalyst for the emergence of innovations in other sectors, such as agriculture and infrastructure.

This paper assesses and disseminates experiences and lessons from low-income countries (LICs) in Sub-Saharan Africa that were selected by the Africa Department in 2015-16 as pilots for enhanced analysis of macro-financial linkages in Article IV staff reports. The paper focuses on the common characteristics across the pilot countries and highlights the tools used in the analysis, the challenges encountered, and the solutions deployed in overcoming them.

This paper discusses findings of the Financial System Stability Assessment for South Africa. South Africa’s financial sector operates in a challenging economic environment. Despite remarkable progress since the end of apartheid in 1994, South Africa still has one of the world’s highest unemployment and income inequality rates. Slow economic growth since 2008 has further aggravated unemployment, real disposable income is stagnant, and households are heavily indebted. Relatively high capital buffers as well as sound regulation and supervision have helped mitigate the risks. Stress tests confirm the capital resiliency of banks and insurance companies to severe shocks but illustrate a vulnerability to liquidity shortfalls.

Agricultural, botanical, and social scientists from the four quarters of the world address the impact of climate change on crop productivity, some approaches to adapt plants to both biotic and abiotic stresses, and measures to reduce greenhouse gases. They cover predictions of climate change within the context of agriculture, adapting to biotic and abiotic stresses through crop breeding, sustainable and resource-conserving technologies for adapting to and mitigating climate change, and new tools for enhancing crop adaptation to climate change. Specific topics include economic impacts of climate change on agriculture to 2030, breeding for adaptation to heat and drought stress, managing resident soil microbial community structure and function to suppress the development of soil-borne diseases, and applying geographical information systems (GIS) and crop simulation modeling in climate change research.