Analysis of The Basel Iii Liquidity and Minimum Capital Requirements Towards Bank Performance: Evidence From Commercial Banks In Indonesia

Rhenaldi Johanes Rokiyanto and Antonius Siahaan ()
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Rhenaldi Johanes Rokiyanto: Swiss German University
Antonius Siahaan: Swiss German University

A chapter in Proceedings of the 5th International Conference on Global Innovation and Trends in Economy 2024 (INCOGITE 2024), 2024, pp 264-275 from Springer

Abstract: Abstract This study identifies the impact of the Basel III Net Stable Funding Ratio (NSFR) and Tier 1 Capital Ratio on the performance of KBMI 3 and KBMI 4 commercial banks in Indonesia from 2018 to 2023. Using Return on Assets (ROA) as the performance metric, panel data regression analysis is conducted with additional control variables including Non-Performing Loan (NPL), Inflation, and Gross Domestic Product (GDP). The findings reveal a significant negative impact of NSFR on bank profitability, indicating that an increase in NSFR leads to a decrease in bank performance. Conversely, the Tier 1 Capital Ratio shows a positive association with ROA, suggesting that higher capital buffers improve bank profitability. These results emphasize the importance of equity capital and lower leverage in reducing the cost of funds for banks. A balanced approach is recommended for banks to comply with the NSFR requirement while maintaining profitability.

Keywords: Basel III Framework; Net Stable Funding Ratio; Tier 1 Capital Ratio; Return on Asset (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-585-0_19

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DOI: 10.2991/978-94-6463-585-0_19

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