A framework for managing the regulatory and economic capital of banks (original) (raw)
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Journal of Economic and Financial Sciences
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American Journal of Finance
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Effects of Basel III Framework on Capital Adequacy of Commercial Banks in Kenya
International Journal of Finance and Accounting, 2016
Purpose:The purpose of the study was toassess the effects of Basel III framework on capital adequacy requirement in commercial banks in Kenya. The study sought to address the following research questions: why are capital adequacy regulations important in commercial banks in Kenya? What challenges are commercial banks facing in the implementation of capital adequacy requirement? What measures have commercial banks taken to ensure compliance with the capital adequacy requirement?Methodology:A descriptive survey design was applied to a population of 43 commercial banks operating in Kenya. The target population composed of the 159 management staff currently employed at the head offices of the various commercial banks in Kenya. The population was composed of Senior, Middle and Junior or Entry level Management staff. A sample of 30% was selected from within each group.Primary data was gathered using questionnaires which were dropped off at the bank’s head offices and picked up later when ...
Extent of Basel II accord adoption and perceived implications on banks' operations in Kenya
Ndimu P.K, 2011
ABSTRACT Basel II framework is based on the 1988 accord’s basic structure of setting capital requirements and builds a firm foundation for capital regulation, supervision and market discipline to enhance prudent risk management to achieve financial stability. The framework better reflects the underlying risks that banks face and provides incentives for risk management. This study sought to examine the extent of Basel II adoption and its perceived implications on commercial banks in Kenya. The study was guided by the following specific objectives: (i) to establish the extent to which Basel II requirements have been adopted by commercial banks in Kenya; and (ii) to determine the perceived implications of Basel II Accord on commercial banks in Kenya. For purposes of this study, a descriptive survey was undertaken. The population was all the commercial banks registered and licensed to undertake commercial banking business in Kenya. The total number of commercial banks stood at 45 as at December, 2009 (CBK, 2009). The respondent from each of the commercial banks was the Chief Executive Officer (CEO) or their designates, who are charged with the responsibility of shaping the strategic direction of their respective organization. The survey method was used to collect data. A semi-structured questionnaire was used to collect primary data from the respondents. The data pertaining to profile of the respondents and their respective organizations was analyzed using content analysis while data pertaining to the objectives of the study was analyzed by employing descriptive statistic. Descriptive statistics were used to describe the basic features of the data in the study. Findings of the study indicate a substantial progress of the Kenyan banking sector as far as Basel II implementation is concerned. The international banks, drawing on the support of their parent groups, are in a better state of adoption compared to local institutions. The findings also show that many banks in Kenya do not rely on External Ratings saves for their international counterparties and large corporate counterparties. This finding is consistent with the limited credit rating penetration in the country. In view of the findings and conclusions, the following recommendations are made for policy and practice: There is limited credit rating penetration in the country. Unrated exposures under the standardized approach would attract higher risk weights and thus more capital would be required to be set aside for such exposures; since Basel II allows for the use of internal models by banks to determine their capital charges pursuant to supervisory approval, a transition period will therefore be required for Kenyan banks to collect the requisite data for the model based approaches to assessing their capital adequacy needs; human resources competencies have been identified as a cross-cutting challenge. Basel II will require banks to upscale their human resource base and a “talent war” in the banking sector can be anticipated going forward; and upgrades and overhauls of existing IT literature systems for most banks will be required. Robust, scalable systems will be required to ensure banks can meet the rigorous Basel II information requirements.
The Impact of Changes in Basel Capital Requirements on the Resilience of African Commercial Banks
Scientific Annals of Economics and Business, 2022
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Basel IV capital requirements and the performance of commercial banks in Africa
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Capital adequacy is considered an essential determinant banks' performance. Banks in Africa have revenue growth opportunities, but fragility and vulnerability to bank failures arising from capital inadequacy and non-performing loans affect their performances. The Basel Committee aims to introduce higher capital requirements is to strengthen the resilience of the banking system; however, the implementation of higher Basel capital requirements may affect the performance of banks. This study examines the potential impact of Basel IV capital requirements (CAR) on the performance of commercial banks from selected African countries. To achieve the set objective, the study simulated Basel IV CAR to create sample representative bank balance sheets using historical data from 2000 to 2018 because Basel IV CAR has not commenced. The study developed a sample-representative of Basel IV CAR and employed static and dynamic panel regression analyses as the estimation techniques. The results suggest that Basel IV CAR portends short-term negative impacts on bank performance while the long-term impact on bank performance is favorable.
American Journal of Finance
Purpose: The purpose of the study was to identify challenges facing commercial banks in the implementation of capital adequacy requirement in Basel III framework.Methodology: A descriptive survey design was applied to a population of 43 commercial banks operating in Kenya. The target population composed of the 159 management staff currently employed at the head offices of the various commercial banks in Kenya. The population was composed of Senior, Middle and Junior or Entry level Management staff. A sample of 30% was selected from within each group. Primary data was gathered using questionnaires which were dropped off at the bank’s head offices and picked up later when the respondents had filled the questionnaires. Descriptive analysis was used to analyze quantitative data while content analysis was used to analyze qualitative data.Results: The study concludes that the implementation of Basel III requirement has been faced by various challenges like growth barrier, regulatory const...
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Bank Regulations and Firm Performance: In the Case of Ethiopian Commercial Banks
International Journal of Finance and Banking Research. , 2023
Profitability is the basic aim of establishing a business, and banks are not exceptions. Thus, the main objective of the study is to examine the impact of bank regulations on the performance of commercial banks in Ethiopia. The panel data was collected from an audited financial statement of nine commercial banks for eleven consecutive years, 2011-2021. The study employed a quantitative research approach to documentary analysis. The study used a fixed effect model on the regression analysis and used E-View10 software. Return of Asset (ROA) was used as a dependent variable. While the statutory reserve requirements, legal reserve requirements, minimum capital requirement, credit risk, capital adequacy, and inflation as independent variables. The regression result revealed that legal reserve requirements, capital adequacy, and inflation had a positive and significant effect on the performance of selected commercial banks. Moreover, the statutory Reserve requirements were found to have a positive but insignificant impact on the bank's performance. On the other hand, minimum capital requirements and credit risk were found to have a negative and significant impact on the performance of selected commercial banks. The study recommended that the National Bank of Ethiopia (NBE) and other regulatory bodies follow and update reserve requirements, inflation, real GDP growth, capital requirements, and other regulations while considering the short and long-term The long-term impact of such policy changes on overall economic performance and commercial Banks in Ethiopia are also recommended to improve their capital growth and analyses the borrowers' creditworthiness before lending out funds, and consider the deposit interest rate and sensitivity of customers to such change against inflation.
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