Sensitivity of banks' capital in the Federation of Bosnia and Herzegovina to changes in exogenous and endogenous factors

Elman Nadžaković (), Senada Dupovac () and Bedrija Hromić ()

BH Ekonomski forum, 2021, vol. 15, issue 2, 53-68

Abstract: In order to ensure that risky assets are covered by the bank's capital, the regulator has prescribed a minimum capital adequacy ratio (CAR). The prescribed CAR, which in the Federation of Bosnia and Herzegovina is 12%, represents the ability of banks to absorb losses caused by bad placements, expressed as the ratio of capital and risk assets of the bank. The sample of this research was performed at the level of the whole banking system of the Federation of Bosnia and Herzegovina. The primary goal of this paper is to try to identify exogenous and endogenous factors that affect the capital sensitivity of banks operating in the Federation of Bosnia and Herzegovina. The research is focused on the period from 2014-2020, every quarter, and the research will explain descriptive statistics, correlation analysis and regression analysis. The research estimated two regression models, assumptions were checked and the obtained results were interpreted. The results of the first model showed that there is a statistically significant positive correlation between the leverage rate and the capital adequacy ratio, and a statistically significant negative correlation between the GDP growth rate and the capital adequacy ratio. The second model confirmed that there is a negative statistically significant correlation between the variables return on average assets (ROAA), total income / average assets (UPPA), net interest income / average assets (NIM) with the capital adequacy ratio.

Keywords: capital adequacy ratio; GDP; leverage; banks; non - performing loans (search for similar items in EconPapers)
Date: 2020-12-01
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Persistent link: https://EconPapers.repec.org/RePEc:etl:journl:44

DOI: 10.5937/bhekofor2102053n

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