Gauging the Macroeconomic Impact of Basel III on Malaysia

Eufrocinio Bernabe and Jami’ah Jaffar

in Staff Papers from South East Asian Central Banks (SEACEN) Research and Training Centre

Abstract: This study gives a preliminary assessment of the macroeconomic impact of implementing Basel III in Malaysia. This is also an attempt to contribute to the increasing studies for emerging economies, especially focusing on SEACEN members. The Basel III standards seek to significantly increase the quality and required level of banks’ capital. Hence, it is expected to strengthen banks’ capacity to absorb risks and reduce the probability of future banking crises. Nevertheless, different strategies adopted by banks to meet the new rules—such as increasing lending rates—can impact negatively on the economy. This study uses the structural model to assess the benefits and costs of implementing Basel III. The benefit is estimated using the expected default probability of banks while the cost is estimated from the impact of higher capital requirement on GDP. Results suggest that the benefits still outweigh the costs. The estimated net effect of Basel III implementation in Malaysia is positive, albeit modest.

Date: 2013
ISBN: 978-983-9478-21-1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.seacen.org/products/702001-100306-PDF.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sea:spaper:sp87

Access Statistics for this book

More books in Staff Papers from South East Asian Central Banks (SEACEN) Research and Training Centre Contact information at EDIRC.
Bibliographic data for series maintained by Azharin ().