Assessing the Impact of Basel III: Evidence from Structural Macroeconomic Models

2022 ◽  
Author(s):  
Olivier De Bandt ◽  
Ceyhun Bora Durdu ◽  
Hibiki Ichiue ◽  
Yasin Mimir ◽  
Jolan Mohimont ◽  
...  
Keyword(s):  
Basel Iii ◽  
Macroeconomic Models ◽  
The Impact

The impact of bank liquidity risk on risk-taking and bank lending: evidence from European bank

2021 ◽  
Vol 6 (2) ◽  
pp. 82-97
Author(s):  
Hongyan Liang ◽  
Zilong Liu
Keyword(s):  
Growth Rate ◽  
Risk Taking ◽  
Fixed Effects ◽  
Liquidity Risk ◽  
Bank Lending ◽  
Basel Iii ◽  
European Banks ◽  
Risk Taking Behavior ◽  
Loan Growth ◽  
The Impact

Objective – This paper uses a sample of annual observations of European banks to examine whether the liquidity risk affects a bank’s risk-taking behavior and its future loan growth. Methodology – A sample of European banks (27 member countries of the European Union plus U.K.) over the period of 2005 to 2019 are used in this study. Liquidity risk is measured by the ratio of liquid assets to total assets. Given the longitudinal nature of the data, the authors use panel regression with bank fixed effects to control for unobserved characteristics that might affect the dependent variable. Findings – The authors find that banks holding more liquid assets take less risk and show a higher subsequent loan growth rate. These results hold for both small and large banks. Novelty – To the authors’ best knowledge, this is one of the earliest studies to carefully examine the effects of liquidity risk on risk-taking behavior and loan growth rate for European banks. Our research suggests that the current Basel III requirement on liquidity ratio can decrease bank’s risking-taking behavior while not necessarily impact their future loan growth. Type of Paper: Empirical JEL Classification: G21, G01, G18. Keywords: Bank Liquidity Risk; Risk-taking Behavior; Loan Growth; Basel III

scholarly journals Liquidity regulations and bank behavior: An emerging markets perspective

2021 ◽  
Vol 10 (4, special issue) ◽  
pp. 194-211
Author(s):  
Tafirei Mashamba
Keyword(s):  
Emerging Markets ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
Emerging Market Economies ◽  
Basel Iii ◽  
Market Economies ◽  
Coverage Ratio ◽  
The Impact

The 2007 to 2009 global financial crisis significantly affected the funding structures of banks, especially internationally active ones (Gambacorta, Schiaffi, & Van Rixtel, 2017). This paper examines the impact of liquidity regulations, in particular, the liquidity coverage ratio (LCR), on funding structures of commercial banks operating in emerging markets over the period 2011 to 2016. Similar to Behn, Daminato, and Salleo (2019) who developed a dynamic partial equilibrium model to examine capital and liquidity adjustments, this paper develops three dynamic error component adjustment models and estimates them using the two-step system generalized method of moments (GMM) estimator to analyze funding adjustments adopted by banks in emerging markets in response to the LCR requirement. The results revealed that banks in emerging markets responded to binding liquidity regulations by increasing deposit, equity as well as long-term funding. In terms of the magnitude of response, deposit funding was found to be more responsive to the LCR rule while the elasticity of equity and long-term funding to the LCR specification was found to be weak. The weak response of equity and long-term funding to liquidity standards was attributed to low levels of capital market development in emerging markets (Bonner, van Lelyveld, & Zymek, 2015). By and large, the results suggest that Basel III liquidity regulations have been effective in persuading banks in emerging market economies to fund their business activities with stable funding instruments. Based on this evidence, the study supports the adoption of Basel III liquidity regulations in emerging markets. Moreover, policymakers in emerging market economies should monitor competition for retail deposits to safeguard the benefits of the LCR rule and pay more attention to developing capital markets.

THE IMPACT OF BASEL III ON THE RUSSIAN BANKING SYSTEM

2021 ◽  
Author(s):  
Danila Andreevich Yakovlev ◽  
Keyword(s):  
Financial Stability ◽  
Banking System ◽  
Banking Regulation ◽  
Basel Iii ◽  
Entire Country ◽  
The Impact ◽  
Systemically Important Banks

Currently, the issue of banking regulation is one of the most urgent due to the fact that the destabilization of this area can threaten the financial stability of the entire country. The Basel Agreements use common approaches to the capital of banks in different countries, they are formulated taking into account possible risks and the presence of systemically important banks. The article analyzes the impact of the Basel III standards on the banking system and assesses the impact of these standards on the development of the banking system.

Credit Risk Measurement, Leverage Ratios, and Basel III

2017 ◽  
pp. 86-116
Keyword(s):  
United States ◽  
The United States ◽  
Basel Iii ◽  
Holding Companies ◽  
Leverage Ratio ◽  
Basel Committee ◽  
Legislative Changes ◽  
Credit Risk Measurement ◽  
The Impact ◽  
The U.S

The Basel III Leverage Ratio, as originally agreed upon in December 2010, has recently undergone revisions and updates – both in relation to those proposed by the Basel Committee on Banking Supervision – as well as proposals introduced in the United States. Whilst recent proposals have been introduced by the Basel Committee to improve, particularly, the denominator component of the Leverage Ratio, new requirements have been introduced in the U.S to upgrade and increase these ratios, and it is those updates which relate to the Basel III Supplementary Leverage Ratio that have primarily generated a lot of interests. This is attributed not only to concerns that many subsidiaries of US Bank Holding Companies (BHCs) will find it cumbersome to meet such requirements, but also to potential or possible increases in regulatory capital arbitrage: a phenomenon which plagued the era of the original 1988 Basel Capital Accord and which also partially provided impetus for the introduction of Basel II. This paper is aimed at providing an analysis of the recent updates which have taken place in respect of the Basel III Leverage Ratio and the Basel III Supplementary Leverage Ratio – both in respect of recent amendments introduced by the Basel Committee and proposals introduced in the United States. As well as highlighting and addressing gaps which exist in the literature relating to liquidity risks, corporate governance and information asymmetries, by way of reference to pre-dominant based dispersed ownership systems and structures, as well as concentrated ownership systems and structures, this paper will also consider the consequences – as well as the impact - which the U.S Leverage ratios could have on Basel III. There are ongoing debates in relation to revision by the Basel Committee, as well as the most recent U.S proposals to update Basel III Leverage ratios and whilst these revisions have been welcomed to a large extent, in view of the need to address Tier One capital requirements and exposure criteria, there is every likelihood, indication, as well as tendency that many global systemically important banks (GSIBS), and particularly their subsidiaries, will resort to capital arbitrage. What is likely to be the impact of the recent proposals in the U.S.? The recent U.S proposals are certainly very encouraging and should also serve as impetus for other jurisdictions to adopt a pro-active approach – particularly where existing ratios or standards appear to be inadequate. This paper also adopts the approach of evaluating the causes and consequences of the most recent updates by the Basel Committee, as well as those revisions which have taken place in the U.S, by attempting to balance the merits of the respective legislative updates and proposals. The value of adopting leverage ratios as a supplementary regulatory tool will also be illustrated by way of reference to the impact of the recent legislative changes on risk taking activities, as well as the need to also supplement capital adequacy requirements with the Basel Leverage ratios and the Basel liquidity standards.

scholarly journals Impact of the Basel III bank regulation on US agricultural lending

2020 ◽  
Vol 80 (3) ◽  
pp. 321-337 ◽  
Author(s):  
Kevin Nooree Kim ◽  
Ani L. Katchova
Keyword(s):  
Growth Rates ◽  
Banking Sector ◽  
Agricultural Sector ◽  
Global Financial Crisis ◽  
Detailed Examination ◽  
Capital Requirements ◽  
Basel Iii ◽  
Content Type ◽  
The Usa ◽  
The Impact

Purpose Following the recent global financial crisis, US regulatory agencies issued laws to implement the Basel III accords to ensure the resiliency of the US banking sector. Theories predict that enhanced regulations may alter credit issuance of the regulated banks due to increased capital requirements, but the direction of changes might not be straightforward especially with respect to the agricultural loans. A decrease in credit availability from banks might pose a serious problem for farmers who rely on bank credit especially during economic recessions. The paper aims to discuss these issues. Design/methodology/approach In this study, the impact of Basel III regulatory framework implementation on agricultural lending in the USA is examined. Using panel data of FDIC-insured banks from 2008 to 2017, the agricultural loan volume and growth rates are examined for agricultural banks and all US banks. Findings The results show that agricultural loan growth rates have slowed down, but the amount of agricultural loan volume issuance still remained positive. More detailed examination finds that regulated agricultural banks have decreased both the agricultural loan volume and their loan exposure to the agricultural sector, showing a possible sign of credit crunch. Originality/value This study examines whether the implementation of the Basel III regulation has resulted in changes in agricultural loan issuance by US banks as predicted by the lending channel theory.

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