Demographic shift and bank stability in SADC countries

Bank stability implications of demographic change have received less attention in the literature. This gap is what this study seeks to address, with reference to the Southern African Development Community (SADC). This analysis is an illustration of the life cycle theory which predicts significant alterations of the balance sheets of economic agents over their life spanning with important consequences on bank stability. The relevance of this theory is empirically assessed using annual data on 155 commercial banks in SADC from 2005 to 2015. Results from panel data techniques indicate that increased dependency, whether young or old, exhibits adverse effects on bank stability proxied by Z-score and standard deviations of bank income. Conversely, large working-age size improves the stability score of banks; therefore, reducing bank instability. In line with the life cycle predictions, these findings suggest the importance of population structure in driving banks' business models besides their individual characteristics.