The effects of Basel III on the intermediation and market activities of WAEMU banks

Thiédjé Gaudens-Omer Kouakou

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyzes the effect of Basel III adapted to WAEMU on the behavior of banks in the zone (intermediation and market activities). After having developed a model for optimizing the return on bank equity, under various constraints (balance sheet constraints, Basel III regulatory constraints), we resort to linear programming via the Danzig simplex algorithm and to a structure of reasonable rates to obtain the optimal values of the various bank balance sheet items. The results, obtained by comparing these theoretical values with the values observed before Basel III (before January 1, 2018), show an increase in the supply of loans, obtained not only from deposits and bank refinancing but also via resources from the financial markets. We can also observe the intuitive result of an increase of bank reserves in line with the constraint that Basel III imposes on banks to increase their liquidity. In short, Basel III tends to strengthen bank financing in the zone, while improving the soundness of banks through the constitution of larger reserves.

Keywords: prudential regulation; calibration; credit supply; linear programming (search for similar items in EconPapers)
JEL-codes: C44 E50 E58 (search for similar items in EconPapers)
Date: 2025-01-31
New Economics Papers: this item is included in nep-acc, nep-fdg, nep-mon and nep-rmg
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