Banks’ Adjustment to Basel III Reform: A Bank-Level Perspective for Emerging Europe

Michal Andrle, Vladimír Tomšík and Jan Vlcek

No 2017/024, IMF Working Papers from International Monetary Fund

Abstract: The paper seeks to identify strategies of commercial banks in response to higher capital requirements of Basel III reform and its phase-in. It focuses on a sample of nine EU emerging market countries and picks up 5 largest banks in each country assessing their response. The paper finds that all banking sectors raised CAR ratios mainly through retained earnings. In countries where the banking sector struggled with profitability, banks have resorted to issuance of new equity or shrunk the size of their balance sheets to meet the higher capital-adequacy requirements. Worries echoed at the early stage of Basel III compilation, namely that commercial banks would shrink their balance sheet by reducing their lending to meet stricter capital requirements, did materialize only in banks struggling with profitability.

Keywords: WP; bank; net income; balance sheet; asset; capital adequacy; Basel III; banking sector assets; cost of capital; capital adequacy ratio dynamics; increase in capital capital ratio; balance sheet growth; CAR decomposition; Income; Capital adequacy requirements; Commercial banks; Financial statements; Stocks; Europe; Baltics; Global (search for similar items in EconPapers)
Pages: 23
Date: 2017-02-10
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Citations: View citations in EconPapers (1)

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Journal Article: Banks’ Adjustment to Basel III Reform: A Bank-Level Perspective for Emerging Europe (2019)
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