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

By Michal Andrle, Vladimír Tomšík, Jan Vlcek

February 10, 2017

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Michal Andrle, Vladimír Tomšík, and Jan Vlcek. Banks’ Adjustment to Basel III Reform: A Bank-Level Perspective for Emerging Europe, (USA: International Monetary Fund, 2017) accessed November 9, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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.

Subject: Banking, Capital adequacy requirements, Commercial banks, Financial institutions, Financial regulation and supervision, Financial statements, Income, National accounts, Personal income, Public financial management (PFM), Stocks

Keywords: Asset, Balance sheet, Balance sheet growth, Baltics, Bank, Banking sector assets, Basel III, Capital adequacy, Capital adequacy ratio dynamics, Capital adequacy requirements, CAR decomposition, Commercial banks, Cost of capital, Europe, Financial statements, Global, Income, Increase in capital capital ratio, Net income, Stocks, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/024
Stock No:

WPIEA2017024
ISBN:

9781475577525
ISSN:

1018-5941

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