Banks’ Adjustment to Basel III Reform: A Bank-Level Perspective for Emerging Europe
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Summary:
The paper seeks to identify strategies of commercial banks in response to higher capital requirements of Basel III reform and its phase-in. It focuses on a sample of nine EU emerging market countries and picks up 5 largest banks in each country assessing their response. The paper finds that all banking sectors raised CAR ratios mainly through retained earnings. In countries where the banking sector struggled with profitability, banks have resorted to issuance of new equity or shrunk the size of their balance sheets to meet the higher capital-adequacy requirements. Worries echoed at the early stage of Basel III compilation, namely that commercial banks would shrink their balance sheet by reducing their lending to meet stricter capital requirements, did materialize only in banks struggling with profitability.
Series:
Working Paper No. 2017/024
Subject:
Banking Capital adequacy requirements Commercial banks Financial institutions Financial regulation and supervision Financial statements Income National accounts Personal income Public financial management (PFM) Stocks
English
Publication Date:
February 10, 2017
ISBN/ISSN:
9781475577525/1018-5941
Stock No:
WPIEA2017024
Pages:
23
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