The Impact of Changes in Basel Capital Requirements on the Resilience of African Commercial Banks

Damilola Oyetade, Adefemi A. Obalade and Paul-Francois Muzindutsi
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Damilola Oyetade: University of KwaZulu-Natal
Adefemi A. Obalade: University of KwaZulu-Natal
Paul-Francois Muzindutsi: University of KwaZulu-Natal

Scientific Annals of Economics and Business (continues Analele Stiintifice), 2022, vol. 69, issue 1, 111 - 132

Abstract: Focusing on a panel sample of 41 commercial banks over the period of 2000-2018, this study examined the effect of capital adequacy on the resilience of commercial banks in Africa under changing Basel levels (II, III, and the proposed Basel IV). The study created sample representative banks for the proposed Basel IV and used two measures, namely Z-score and CAMELS, to capture bank resilience. Using the panel logistic regression and fixed effect model, we found that capital adequacy, liquidity, earnings management efficiency, and macroeconomic conditions are key determinants of the resilience of commercial banks in Africa. Additionally, Basel compliant banks tend to be less prone to macroeconomic factors. Based on the positive and significant impact of all Basel capital ratios on Zscore, the results suggest that a high level of capital requirements increases African banks' resilience, and banks with higher capital can absorb risk exposures.

Keywords: bank risk; Basel capital requirements; resilience; African Banks. (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:aic:saebjn:v:69:y:2022:i:1:p:111-132:n:1

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