{
  "title": "Banks’ Adjustment to Basel III Reform: A Bank-Level Perspective for Emerging Europe",
  "publication": "IMF Working Papers, February 10, 2017",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2017/02/10/banks-adjustment-to-basel-iii-reform-a-bank-level-perspective-for-emerging-europe-44649",
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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.",
  "sections": [
    {
      "heading": "Study objective and sample",
      "content": "- Objective: Identify strategies of commercial banks in response to higher capital requirements of Basel III reform and its phase-in.\n- Sample: nine EU emerging market countries; 5 largest banks in each country."
    },
    {
      "heading": "Methodology (scope and focus)",
      "content": "- Bank-level assessment across the selected sample to evaluate adjustments to higher capital-adequacy requirements.\n- Focus on changes in capital adequacy ratio (CAR) composition and balance sheet responses."
    },
    {
      "heading": "Key findings",
      "content": "- All banking sectors in the sample raised CAR ratios mainly through retained earnings.\n- In countries where the banking sector struggled with profitability:\n  - Banks resorted to issuance of new equity, or\n  - Banks shrunk the size of their balance sheets to meet higher capital-adequacy requirements.\n- The early-stage concern that banks would shrink lending to meet stricter capital requirements materialized primarily in banks struggling with profitability—not broadly across all banks."
    },
    {
      "heading": "Implications and interpretation",
      "content": "- Retained earnings were the primary adjustment channel to Basel III capital requirements for the sample.\n- Profitability constraints determined whether banks pursued equity issuance or balance-sheet contraction as supplementary strategies.\n- Policy attention may be warranted for less-profitable banks where adjustment to higher capital requirements can translate into reduced lending and balance-sheet contraction.\n\nSource: IMF Working Paper — “Banks’ Adjustment to Basel III Reform: A Bank-Level Perspective for Emerging Europe”\n\n---\n\n Content in this bundle\n\n- Banks’ Adjustment to Basel III Reform: A Bank-Level Perspective for Emerging Europe\n  - Banks’ Adjustment to Basel III Reform: A Bank-Level Perspective for Emerging Europe (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Banks’ Adjustment to Basel III Reform: A Bank-Level Perspective for Emerging Europe (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2017/02/10/banks-adjustment-to-basel-iii-reform-a-bank-level-perspective-for-emerging-europe-44649"
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    "Authors: Michal Andrle, Vladimír Tomšík, Jan Vlcek",
    "Published: February 10, 2017",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781475577525.001",
    "Objective: Identify strategies of commercial banks in response to higher capital requirements of Basel III reform and its phase-in.",
    "Sample: nine EU emerging market countries; 5 largest banks in each country.",
    "Bank-level assessment across the selected sample to evaluate adjustments to higher capital-adequacy requirements.",
    "Focus on changes in capital adequacy ratio (CAR) composition and balance sheet responses.",
    "All banking sectors in the sample raised CAR ratios mainly through retained earnings.",
    "In countries where the banking sector struggled with profitability:",
    "The early-stage concern that banks would shrink lending to meet stricter capital requirements materialized primarily in banks struggling with profitability—not broadly across all banks.",
    "Retained earnings were the primary adjustment channel to Basel III capital requirements for the sample.",
    "Profitability constraints determined whether banks pursued equity issuance or balance-sheet contraction as supplementary strategies.",
    "Policy attention may be warranted for less-profitable banks where adjustment to higher capital requirements can translate into reduced lending and balance-sheet contraction.",
    "**Banks’ Adjustment to Basel III Reform: A Bank-Level Perspective for Emerging Europe**"
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