Impact of Basel Accords in mitigating banking fragility in Africa
Date
2016
Authors
Kahari, Lynda Rosie
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Abstract
Mitigating bank fragility provokes interest from governments, regulators, economists, and academia because have a “special role” in the development of an economy, hence the search for effective risk management tools. Basel framework provides risk management tools that use capital requirements, supervision and market discipline. However, this study examines the impact of regulatory capital requirements and macroeconomic variables on net interest margin (efficiency), equity to total assets (solvency), liquidity and growth to total assets for Botswana, Kenya, Mauritius, Namibia, Tanzania and Uganda in the periods 1999 to 2014.
Given that the Basel Accords were initially designed for OECD countries; the argument is that they are not suited for African countries because they restrict the development agenda set by governments. However, the trend and regression analysis indicate that regulatory capital ratio has a significant impact on the equity to total assets ratio, liquidity and net interest margin demonstrating their effectiveness in minimising bank fragility. Conversely the results show that regulatory capital ratio does not have an effect on the growth to total assets, indicating that banks should be able to lend out to households and private sector to stimulate economic development. Additionally, the results show that an increase in GDP growth, a declining inflation rate, a falling real interest rate and an appreciating exchange rates have a significant influence on the financial soundness indicators
Description
Thesis submitted in fulfilment of the requirements for the degree of Master of Management in Finance and Investment
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Citation
Kahari, Lynda Rosie (2016) Impact of Basel Accords in mitigating banking fragility in Africa, University of the Witwatersrand, Johannesburg, <http://hdl.handle.net/10539/23702>