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Basel III is a framework to protect the global banking system. The purpose of this paper is to provide a policy discussion on Basel III in Africa.

The significance of Basel III is discussed, and some ideas to consider when implementing Basel III to make it work in Africa, are provided.

Under Basel III, the African banking industry should expect better capital quality, higher capital levels, minimum liquidity requirement for banks, reduced systemic risk and differences in Basel III transitional arrangements. This paper also emphasizes that there should be enough time for the transition to Basel III in Africa; a combination of micro and macro-prudential regulations is needed; and the need to repair the balance sheets of banks, in preparation for Basel III.

The discussions in this paper will benefit policymakers, academics and other stakeholders interested in financial regulation in Africa such as the World bank and the International Monetary Fund.

The purpose of this paper is to describe a theoretical model for banking regulation in relation to Basel accords implementation. As a risk manager practitioner at a financial institution and in-charge of Basel implementation in a Basel accords environment of banking regulation, the author has been intrigued by the theoretical basis of the design of Basel accords. The objective was to investigate a theoretical model in the literature according to which the accords were designed. In case of deficiency in the literature of this model, the author seeks to provide a juxtaposition to the theoretical model that explains the accords adoption and implementation by regulators.

This paper presents a review of existing literature.

After reviewing of public interest theory, cultural theory, administration theory and the new-institutionalism theory, the author found little application of these theories to the capital-based regulation, particularly in relation to Basel 2 accord. There is deficiency in the literature of a conceptual theoretical framework based on which the author can explain the adoption of Basel accords. The author has provided a theoretical model that links these theories to the practice of banking regulation. This paper found deficiencies in theories of how banks should be regulated as compared to several theories that explains why banks are regulated.

After reviewing of public interest theory, cultural theory, administration theory and the new-institutionalism theory, the author found little application of these theories to the capital-based regulation, particularly in relation to Basel 2 accord. There is deficiency in the literature of a conceptual theoretical framework based on which the author can explain the adoption of Basel accords. The author has provided a theoretical model that links these theories to the practice of banking regulation. This paper found deficiencies in theories of how banks should be regulated as compared to several theories that explains why banks are regulated.

The Federal Reserve regulates U.S. commercial banks using a system of risk-based capital (RBC) regulations based on the Basel Accords. Unfortunately, the Fed’s mis-rating of several assets such as mortgage-backed securities encouraged the build-up of these assets in the banking system and was a major contributing factor to the 2008 financial crisis. The Basel system of RBC regulation is a prime example of a Hayekian knowledge problem. The contextual, tacit, and subjective knowledge required to properly assess asset risk cannot be aggregated and utilized by regulators. An effective system of banking regulation must acknowledge man’s limited knowledge and place greater value on individual decisions than on top-down planning.

The paper aims to examine the impact of tighter banking regulation on banks’ loan loss provisioning in an emerging market context.

The authors exploit the adoption of the Basel II Accord in Vietnam as a quasi-natural experiment and use Difference-to-Difference (DiD) method to examine the impact of tighter banking regulation on Vietnamese banks’ provisioning during the period of 2010–2019.

The paper finds that affected banks (i.e. those taking part in the pilot adoption programme) manage to reduce their provisions significantly compared to their control peers in the post-adoption period. More importantly, this paper further finds that the affected banks manage their provisions primarily for incomes smoothing and signalling. This paper also finds that those banks expand their lending significantly and experience an increase in financial performance in the post-adoption period. Overall, the results provide supports for the “borrowing from the future” proposition that banks may perceive that a tighter banking regulation provides them with growth opportunities, so they have the tendency to manipulate their provisions to facilitate their current income.

This paper contributes to the established literature on the manipulation of bank provisioning as well as the impact of banking regulation, and especially Basel II on bank economic decisions. As compared to prior literature, the adoption of Basel II in Vietnam provided an ideal shock for us to conduct a DiD design to estimate the causal impact of tighter banking regulation on banks’ provisioning practices.

The authors examine whether Chinese banks use loan loss provisions (LLPs) for capital management, income smoothing and signaling purposes, and assess the effect of the recent regulatory changes following the implementation of Chinese Basel III on such behavior.

The authors use a unique set of hand-collected data on bank capital combined with financial data downloaded from the China Stock Market and Accounting Research (CSMAR) database. Multivariate regression models are used to test our hypotheses.

The authors find that while there is no evidence to suggest capital management practice before the Chinese Basel III, the implementation of the new regulations induced listed banks to manage tier-1 capital via LLPs. The authors also find strong support that Chinese banks engage in income smoothing via LLPs management, and there is no change in such tendency following the issuance of Chinese Basel III. Lastly, the authors do not find support for the signaling behavior by Chinese banks using LLPs.

The authors’ evidence suggests that elevated tier-1 capital and provisioning requirements may induce capital management by banks, which indicates a potential unintended effect brought forth by the new Basel regulations.

To the best of authors’ knowledge, this study is the first to examine Chinese banks' behavior relating to LLPs in terms of capital management, income smoothing and signaling. In particular, the authors use a sample containing a large number of Chinese commercial banks – previously a major data issue in other studies.

The purpose of this paper is to examine to what extent is the impact of Basel II adoption on bank business models in the emerging market of selected ASEAN member states.

To evaluate the impact of the Basel II regulation on banking business models, a difference-in-differences estimation approach is used. This study defines bank business models using diversification index of a modified Herfindahl–Hirschman Index.

The findings suggest that the Basel II framework only affects banks’ income diversification, while there is no evidence that it leads to funding and asset diversification. Under the Basel II accord, banks have adjusted their business models by diversifying their sources of income to avoid the obligation for keeping more capital; in contrast, a less developed financial market structure and a dependency on customer deposits are creating difficulties for banks in diversifying their funding and asset structure.

The banking sample are taken only from ASEAN countries.

The findings provide important implication on the regulatory perspective, which is the implementation of Basel II framework induces higher intensity for the use of non-interest income activities. Including in these activities are trading and derivatives. Accordingly, the financial authorities should take with care the use of trading and derivatives products in the banking industry which is already embedded in current Basel framework, the Basel III Accord.

The paper provides direct evidence on the impact of Basel II on bank business models in the emerging markets of ASEAN banking sectors.

The study examines whether the Basel-III regulations impact the financial performance, operational efficiency and resilience of Indian banks. Further, the study tests whether there is a variance in the impact between private- and public-sector banks.

The study uses panel data regression on data from 16 private- and 12 public-sector banks from the years 2016–2022. Random-effect estimation is used, and robust standard errors are calculated.

The main findings indicate that the Basel-III regulations related to capital and leverage boost public-sector banks' financial performance and resilience. However, a similar impact is not detected in the case of private-sector banks.

The findings signify that the Basel-III framework does not address the differences between public and private-sector banks. Therefore, the policy implications are of practical importance and indicate that Basel-III regulations should not be considered a one-size-fits-all type of bank. Instead, policymakers should consider the structural differences between private and public-sector banks concerning Basel-III regulations.

The study addresses a significant limitation of the Basel-III regulations, which, in their current state, somehow fail to account for the differences between the public- and private-sector banks.

The purpose of this study is to show the presence of market discipline and provide an explanation for bank risk nondisclosure behavior, specifically market risk (MR), credit risk (CR), operational risk (OR) and counterparty credit risk (CCR). The response of market discipline when banks comply with Basel III capital and liquidity restrictions is also investigated in this study.

The study used the Lasso regression method to give accurate results with the lowest error when using small observational data with a large number of features.

First, theoretically, the study points to the presence of market discipline and its sensitivity to the risks disclosed by the bank, especially when applying capital regulations under Basel III. In addition, the study also shows differences between the developed and emerging countries in the sensitivity of market discipline to factors when considering banking regulations. Finally, an interesting result that the study shows is that the higher the index of economic freedom, the weaker the market discipline is, especially for emerging countries.

The study’s findings have several important implications: (1) help regulators devise policies to manage banks' risk and meet liquidity and capital requirements according to the Basel III framework. The effectiveness of market discipline is reduced, and banking regulators need to compensate by strengthening their supervisory functions. (2) Showed the reasons why banks ignore the disclosure of bank risks according to the provisions of the third pillar of the Basel III framework. Because when following the Basel III framework, depositors demand higher interest rates or increase market discipline towards riskier banks.

This study is the first attempt to assess market discipline under the new capital and liquidity regulations using the Lasso regression model as suggested by Tibshirani (1996, 2011), Hastie et al. (2009, 2015). This is also the first study to look at the impact of four different forms of risk on market discipline (as required by the Basel regulatory framework to improve disclosure).

This study aims to analyze how recent regulation changes, namely, Basel II and the New Turkish Commercial Code, affect small and medium-sized enterprises (SMEs) and the relationship between SMEs and banks in Turkey through the eyes of SME managers. The author believes that the answers could differ for various types of SME.

In-depth interviews enabled a refined analysis of the effects of regulations in the eyes of firms’ representatives. The study was conducted for SMEs in the Anatolia Organized Industrial Zone.

One of the important conclusions of the paper is the fact that the loan approval process has been standardized and centralized. The results also show that regulations have different effects on larger and already stable firms than on smaller and/or start-up SMEs that do not have sufficient resources for the transformation required by regulations.

First, this study is a qualitative study that has the advantage of reaching richer and more plausible information that cannot be obtained by analyzing the numbers. Second, this study tries to analyze the perceptions of SMEs’ financial representatives rather than the perspectives of bank representatives. Finally, to the author’s knowledge, there has been no other study that analyzed a developing country on this topic.

This paper aims to examine the impact of capital regulation, ownership structure and the degree of ownership concentration on the risk of commercial banks.

This study uses a sample of 565 commercial banks from 52 countries over the period of 2011-2015. A dynamic panel data model estimation using the maximum likelihood with structural equation modelling (SEM) was followed considering the panel nature of this study.

The study found that the increase of capital ratio decreases bank risk and the regulatory pressure increases the risk-taking of the bank. No statistically significant relationship between banks’ ownership structure and risk-taking was found. The concentration of ownership was found negatively associated with bank risk. Finally, the study found that in the long term, bank increases the capital level that decreases the default risk.

This study presents an empirical analysis on the global banking system focusing on the Basel Committee member and non-member countries that reflect the implementation of Basel II and Basel III. Therefore, it helps fill the gap in the banking literature on the effect of recent changes in the capital regulation on bank risk. Maximum likelihood with SEM addresses the issue of endogeneity, efficiency and time-invariant variables. Moreover, this study measures the risk by different proxy variables that address total, default and liquidity risks of the banks. Examining from a different perspective of risk makes the study more robust.