scholarly journals Developing “best practices” for bankers’ pay in line with Basel III.

2011 ◽  
Vol 1 (3) ◽  
pp. 7-16 ◽  
Author(s):  
Peiyi Yu ◽  
Jessica Hong Yang ◽  
Nada Kakabadse

This paper proposes hybrid capital securities as a significant part of senior bank executive incentive compensation in light of Basel III, a new global regulatory standard on bank capital adequacy and liquidity agreed by the members of the Basel Committee on Banking Supervision. The committee developed Basel III in a response to the deficiencies in financial regulation brought about by the global financial crisis. Basel III strengthens bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage. The hybrid bank capital securities we propose for bank executives’ compensation are preferred shares and subordinated debt that the June 2004 Basel II regulatory framework recognised as other admissible forms of capital. The past two decades have witnessed dramatic increase in performance-related pay in the banking industry. Stakeholders such as shareholders, debtholders and regulators criticise traditional cash and equity-based compensation for encouraging bank executives’ excessive risk taking and short-termism, which has resulted in the failure of risk management in high profile banks during the global financial crisis. Paying compensation in the form of hybrid bank capital securities may align the interests of executives with those of stakeholders and help banks regain their reputation for prudence after years of aggressive risk-taking. Additionally, banks are desperately seeking to raise capital in order to bolster balance sheets damaged by the ongoing credit crisis. Tapping their own senior employees with large incentive compensation packages may be a viable additional source of capital that is politically acceptable in times of large-scale bailouts of the financial sector and economically wise as it aligns the interests of the executives with the need for a stable financial system.

2019 ◽  
pp. 329-406
Author(s):  
Iris H-Y Chiu ◽  
Joanna Wilson

This chapter studies capital adequacy regulation, which prescribes that banks can only take certain levels of risk that are supported by adequate levels of capital. In this way, capital adequacy rules provide a form of assurance that banks with adequate levels of capital are likely able to withstand losses that may result from their risk-taking. The Basel Committee developed its first set of capital adequacy standards in the Basel I Capital Accord of 1988. It was subsequently overhauled into the Basel II Capital Accord in 2003. After the global financial crisis of 2007–9, the Basel II Accord’s shortcomings were extensively discussed and the Basel Committee introduced a package of reforms in order to plug the gaps in Basel II. The Basel III package is the most extensive suite of micro-prudential regulation reforms seen to date, as they deal with capital adequacy and a range of other micro-prudential standards.


2015 ◽  
Vol 2015 ◽  
pp. 1-9
Author(s):  
Yufeng Li ◽  
Zhongfei Li

Since the global financial crisis of 2007-2008, the importance of the procyclicality in the banking sector has been highlighted. One of the Basel III objectives is to promote countercyclical buffers and reduce procyclicality. We apply time-varying copula combined with GARCH model to test the existence of asymmetric procyclicality of Chinese banking. The results show that the procyclicality of Chinese banking is asymmetric, where the dependence between loan and economy growth is more correlated during the decline stage than the rise stage of economy. Based on this asymmetry, we suggest that the authority can use high frequent index for signalling the start point of releasing countercyclical buffer and accelerate the releasing pace to avoid the supply of credit being constrained by regulatory capital requirements in downturns.


2021 ◽  
Vol 20 (3) ◽  
pp. 641-657
Author(s):  
Irena Pyka ◽  
Aleksandra Nocoń ◽  
Mateusz Muszyński

Motivation: After the global financial crisis, banks’ financial safety has been considered as a public good and put under closer control and supervision. The prudential regulations of credit institutions which are the main subject of the study, have been significantly tightened. Although the minimum level of banks’ own funds, set adequately to the risk, had been a fundamental indicator of banks’ financial safety since the end of 1980s, after the global financial crisis the quality of this capital has changed and the scope of its regulation has been increased. By respecting the new prudential standards of the Basel Committee on Banking Supervision at the international level, financial safety of the banks has been additionally put under the macro-supervision. The concern about the overregulation of the banking system raises many controversies, what justifies conducting research on this subject. Aim: The main purpose of the article is to identify changes in the bank’s strategies of creating financial safety after the global financial crisis, considering macro- and micro-prudential regulations, aimed at strengthening the level and quality of bank capital, based on the results of the conducted research. Results: The results of the empirical research indicate that there is a strong belief among management staff in commercial banks in Poland that the increase in the level and structure of the own funds in credit institutions rises their financial safety. The results confirm the intensification of the process of implementing Basel regulations in commercial banks in Poland.


2019 ◽  
Author(s):  
Komang Agus Rudi Indra Laksmana

The global financial crisis that occurred in 2007/2008 has encouraged state leaders who are membersof the G-20 to declare international efforts aimed at increasing transparency, accountability and regulation ofthe financial sector through strengthening the quantity and quality of the banking sector capital. This was basedon the occurrence of the global financial crisis in 2008, one of which was caused by the excessive level of leveragein the banking system both for the position recorded on the balance sheet (on-balance sheet) and inadministrative accounts (off-balance sheet). The final results of the recommendations are thenissued by Basel III:A global regulatory framework for more resilient banks andbanking systems on December 2010. In general, theBasel III agreement has threemain components, namely capital, liquidity and leverage ratio. The applicationofBasel III capital has an impact that will vary in various countries depending onthe number of exposures affected.This study conducted an impact analysis on theperformance of Basel III capital towards the performance of banksin Indonesiaduring the period of 2018 based on capital adequacy (CAR), and on the liquidity(NSFR, LCR) on growthin profitability (ROA). The study involved 11 banks withthe largest assets in Indonesia in 2018. The results showedthat CAR had asignificant negative effect on ROA, while the NSFR had a significant positiveeffect on ROA,and LCR had a significant negative effect on ROA. This study waslimited in terms of the number of samples anddata used, therefore furtherresearch is expected to increase the amount of data and samples and researchvariables.Keyword: Basel III; CAR; LCR


2019 ◽  
Vol 16 (4) ◽  
pp. 457-483
Author(s):  
Andreas Kerkemeyer

In September, 2008, the meltdown of the investment bank Lehman Brothers accelerated the Global Financial Crisis, which affected economies and consumers worldwide. As soon as the Global Financial Crisis broke out, governments and legislators recognized the need for macroprudential reform in order to build a resilient financial system. Today, legislators in every major jurisdiction have finalized almost all major reforms that were envisaged once it had become clear that the crisis was also due to regulatory shortcomings. The reforms especially targeted (over-the-counter) derivatives and the equity base of banks. Following an analysis of the reasons for the Global Financial Crisis and the regulatory failures that contributed to its severity this article will discuss two major legislative responses that intend to make the financial system robust – the establishment of a central dearing obligation for over-the-counter derivatives and the revised Basel Accords on capital requirements for banks.


Ekonomika ◽  
2015 ◽  
Vol 93 (4) ◽  
pp. 119-134 ◽  
Author(s):  
Filomena Jasevičienė ◽  
Daiva Jurkšaitytė

Currently, banking is one of the most regulated activities in the world, because banks are the most important institutional units engaged in financial intermediation and affects not only the whole national economy of the country, but the global financial market as well. One of the key components of banking regulation are requirements expected for the bank capital, which prevent the bank from various unforeseen risks incurring substantial losses and are a sort of guarantee to maintain the financial system stability. For this reason, it is useful to find out what factors affect the capital adequacy ratio, and what measures the banks are going to take in order to meet the new capital requirements. The present research reveals the options of the implementation of the new system and the main problems faced by banks. The paper consists of four main parts: review of theory and literature, the research methodology of the factors influencing the capital adequacy, the study of factors influencing the capital adequacy ratio, and the capital adequacy management problem areas according to the Basel III requirements and conclusions.


2019 ◽  
Vol 3 (1) ◽  
pp. 7-13
Author(s):  
Dety Nurfadilah

The focus on the bank bailout has been increased since the global financial crisis in 2008 in most countries. However, previous studies often discover the relationship between bailout and corporate governance. In this study, bank bailout literature will be reviewed with the focus on the impact of bailout on bank financial performance and bank risk-taking during the financial crisis. Multi-step strategy is used to collect the data from 2000 to 2016. From the 7 papers were chosen based on the criteria. This systematic review has shown that the bank bailout has a positive impact on financial performance, however, it has a negative impact on bank risk-taking for a longer period.


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