Bank Capital Adequacy as an Object of Corporate Management

The bank capital structure debacle in the aftermath of the 2007-2009 financial crises continues to preoccupy the minds of regulators and scholars alike. In this paper we investigate the relationship between capital structure and profitability within the context of an emerging market of South Africa. We conduct multiple linear regressions on time series data of big South African banks for the period 2002 to 2013. We establish a strong relationship between the ROA (profitability measure) and the bank specific determinants of capital structure, namely capital adequacy, size, deposits and credit risk. The relationship exhibits sensitivity to macro-economic shocks (such as recessions), in the case of credit risk and capital but is persistent for the other determinants of capital structure.

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Dynamics of Risk Factors Affecting the Capital Adequacy Ratio with Special Reference to UCO Bank

Asian Journal of Managerial Science ◽

10.51983/ajms-2019.8.2.1559 ◽

2019 ◽

Vol 8 (2) ◽

pp. 10-13

Author(s):

Preeta Sinha ◽

Protik Basu

Keyword(s):

Market Risk ◽

Capital Adequacy ◽

Basel Iii ◽

Bank Capital ◽

Financial Reports ◽

Factors Affecting ◽

Operational Risks ◽

Capital Adequacy Ratio ◽

Using Data ◽

Asset Quality

To reinforce the stability of the financial system, policy makers and the Basel committee have proposed Basel accord to ensure that financial institutions maintain sufficient capital buffers. Basel III framework emphasizes on sustained increase in bank capital in order to absorb the potential credit, market and operational risks. The capital adequacy requirement under Basel III norms are directly linked to the PCA (Prompt Corrective action) framework which has disrupted the flow of credit in the economy. Market risk, Credit risk, Operational risk and deposits are some of the factors affecting the capital adequacy ratio (CAR) which influences the bank performances. This study aims at analysing the most important factor responsible for the shrinking liquidity due to adherence of stringent capital adequacy ratio imposed by RBI. Currently 11 public sector Banks out of 21 PSUs under PCA has sequentially shrunk their loan book including UCO Bank. The bank’s asset quality has worsened over the years. Using regression analysis, this paper seeks to study the major determinants of Capital Adequacy ratio using data sets for the period from 2009 to 2018 of UCO bank. The data was collected from the financial reports of the UCO bank for the aforesaid period. Among the parameters considered, it was found that deposits affect the CAR the most and market risk has the lowest impact on CAR.

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INTERNATIONAL STANDARDS FOR BANK CAPITAL REGULATION

Financial and credit activity problems of theory and practice ◽

10.18371/fcaptp.v1i36.227609 ◽

2021 ◽

Vol 1 (36) ◽

pp. 35-45

Author(s):

V. Kovalenko ◽

S. Sheludko ◽

N. Radova ◽

F. Murshudli ◽

K. Gonchar

Keyword(s):

Financial Crisis ◽

Economic Crisis ◽

Financial Stability ◽

International Standards ◽

Capital Adequacy ◽

Capital Regulation ◽

Bank Capital ◽

Banking Supervision ◽

New Paradigm ◽

Bank Capital Regulation

The paper analyzes the evolution of the introduction of international standards for bank capital regulation. The aim of the research is to study international standards for bank capital regulation and their impact on financial stability and sustainability of domestic banking systems. The 2007—2009 Global Financial Crisis was perhaps the greatest banking and financial crisis since bank failures and the financial panic of the Great Depression in early 1930s. According to academics and professionals, there has been much debate over the last decade as to whether the 2007—2009 banking crisis was primarily a solvency crisis or a liquidity crisis. Capital adequacy of banks today is the main indicator of increasing society’s confidence in banking systems. The flexible and balanced implementation of Basel Committee on Banking Supervision (BCBS) recommendations on the assessment of bank capital adequacy is of particular importance in the context of the deepening economic crisis caused by COVID-19 quarantine restrictions. Regulation of bank capital is primarily settles by the ability to execute basic functions inherent in it. A number of shocks in connection with the crisis require the renewal and search for a new paradigm of regulation, which today is focused on achieving financial stability, overcoming pro-cyclicality, especially in the banking sector. One of the latest developments in the field of bank capital regulation has been the implementation of international banking supervision standards recommended by BCBS, which have been transformed from Basel I, Basel II, Basel III, Basel 3.5 to Basel IV. The new ideology suggests that in times of financial and economic crisis or in anticipation of growing uncertainty in the economy, it is necessary to abandon the idea of bank capital management and the creation of financial reserves to maintain liquidity and stability of financial institutions. These measures will not be able to protect the bank from default and bankruptcy. This ideology has become a new paradigm of effective banking regulation, which can be formulated as an accepted set of three vectors: risk; risk management; risk-oriented supervision.

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