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Basel III in Nigeria: making it work

Peterson K Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: Basel III is a framework to preserve the stability of the international banking system. Nigeria adopts Basel capital framework for capital regulation in the banking sector. This article is a policy discussion on how to make Basel III work in Nigeria. The significance of Basel III is discussed, and some ideas to consider when implementing Basel III to make it work in Nigeria, are provided. Under Basel III, the Nigerian banking system should expect better capital quality, higher levels of capital, the imposition of minimum liquidity requirement for banks, reduced systemic risk, and a transitional arrangement for transitioning across Basel I and II. This article also emphasizes that (i) there should be enough time for the transition to Basel III in Nigeria, (ii) a combination of micro- and macro- prudential regulations is needed; and (iii) the need to repair the balance sheets of banks, in preparation for Basel III. The study recommends that the Nigerian regulator should enforce strict market discipline and ensure effective supervision under the Basel framework. There should be international cooperation between the domestic bank regulator and bank regulators in other countries. The regulator should have a contingency plan to reassure the public of the safety of their deposits, and there should be emergency liquidity solutions to support the financial system in bad times.

Keywords: Basel III; Bank Business Models; Bank Performance; Financial Stability; Capital Regulation; Bank Regulation; Nigeria (search for similar items in EconPapers)
JEL-codes: G01 G20 G21 G22 G23 G24 G28 G29 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-acc, nep-ban, nep-fdg, nep-fmk and nep-rmg
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