Bank runs and banking policies: Lessons for African policy makers

This paper documents and explains the near-permanent banking stress African countries have experienced during the last 20 years. The central hypothesi s is that banking stress comes predominantly from unbooked losses and that the level of unbooked losses a banking system can accumulate depends on its information environment and the effectiveness of government efforts to sup ervise and guarantee bank solvency. African depositors face high costs for mitigating the loss exposures that banks and regulators impose on them, and African regulators have not been made accountable for these costs. We pres ent evidence that over 1980-99 the average length of time an African bankin g system spent in crisis increased with the level of government corruption.