The impact of liquidity and capital requirements on lending and stability of African banks

Mutarindwa, Samuel; Schäfer, Dorothea; Stephan, Andreas

doi:10.1016/j.intfin.2020.101201

Cited by 8 publications

(13 citation statements)

References 53 publications

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“…We utilise a dual banking setting to offer comparative assessments between Islamic and conventional banking market valuations. Our examination extends the on-going debate related to structures of corporate governance and the implications on global banking stability, liquidity risk and market valuations (Safiullah and Shamsuddin, 2019;Elnahass et al, 2020a,b;Mohammad et al, 2020;Mutarindwa et al, 2020;Trinh et al 2020c). We assess whether different institutional characteristics and governance structures for different bank types affect firm valuations for cash holdings.…”

Section: Introductionmentioning

confidence: 54%

“…Holding excess cash could potentially generate financial slack and lead to substantial agency costs due to the likelihood of managers' misuse of liquidity assets (i.e. cash and equivalents) and other disciplinary pressures to spend the excess cash on non-profitable investments, serving their own interests at the expenses of owners (Jensen, 1986;Myers and Rajan, 1998;Mikkelson and Partch, 2003;Ahrends et al, 2018). This, in turn, suggests that trade-off theory dominates the financial hierarchy theory in describing corporate cash policy.…”

Section: Introductionmentioning

confidence: 99%

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The value relevance of bank cash Holdings: The moderating effect of board busyness

Trinh

Elnahass

Cao

2021

Journal of International Financial Markets, Institutions and Mo

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Section: Introductionmentioning

confidence: 54%

Section: Introductionmentioning

confidence: 99%

The value relevance of bank cash Holdings: The moderating effect of board busyness

Trinh

Elnahass

Cao

2021

Journal of International Financial Markets, Institutions and Mo

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“…Liquidity regulations were neglected by Basel I and Basel II regulations (Banerjee and Mio, 2018; Naceur et al , 2018; Roulet, 2017). Previous studies focused on the effect of the new liquidity requirements on bank lending (Adesina, 2019; Banerjee and Mio, 2018; Mutarindwa et al , 2020; Naceur et al , 2018; Roulet, 2017). Roberts et al (2019) conducted the only study on the impact of Basel III regulation on liquidity creation, investigating the effect of LCR regulation on liquidity creation by US banks.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Basel III liquidity regulatory framework and bank liquidity creation in MENA countries

Mdaghri

Oubdi

2021

JFRC

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Purpose This paper aims to investigate the potential impact of the Basel III liquidity requirements, namely, the net stable funding ratio (NSFR) and the liquidity coverage ratio (LCR), on bank liquidity creation. Design/methodology/approach The authors developed a dynamic panel model using the Quasi-Maximum Likelihood estimation on an unbalanced panel dataset of 129 commercial banks operating in 10 Middle Eastern and North African (MENA) countries from 2009 to 2017. Findings The results show that the NSFR significantly negatively affects liquidity creation. Similarly, the LCR exerts a substantial negative impact on the liquidity creation of the sampled MENA banks. These findings suggest that complying with both liquidity requirements tends to curtail liquidity creation. Moreover, further regression analysis of large and small bank sub-samples uncovered results similar to the overall MENA sample. Research limitations/implications The findings raise interesting policy implications and suggest a trade-off between the benefits of the financial resiliency induced by implementing liquidity requirements and the creation of liquidity essential for promoting economic growth in the region. Originality/value Most empirical research focuses on the relationship between bank capital and liquidity creation. To the knowledge, this paper is the first to provide empirical evidence on the effect of both the NSFR and LCR regulatory liquidity standards on bank liquidity creation in the MENA region.

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“…Since the global financial crisis of 2007/2008 and the recent Covid-19 pandemic, numerous studies have been conducted to disclose the different factors explaining the financial stability of the banking sector (Adusei, 2015;Diallo et al, 2015;Ghenimi et al, 2017;Ali et al, 2019;Barra and Zotti, 2019;Zaghdoudi, 2019;Djebali and Zaghdoudi, 2020;Gupta and Kashiramka, 2020;Kim et al, 2020;Mutarindwa et al, 2020;Nair and Anand, 2020;Feghali et al, 2021;Lesmana, 2021;Malik et al, 2021). These studies used several factors as determinants of banks stability, such as funding risk (Adusei, 2015), credit, liquidity, and operational risk (Diallo et al, 2015;Zaghdoudi, 2019), Corporate governance (Subhani and Zeb, 2021), Governance quality and financial inclusion (Malik et al, 2021), Bank size (Ali et al, 2019) and Accounting (Bischof et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

Bank Specific Risks and Financial Stability Nexus: Evidence From Pakistan

et al. 2022

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This article investigates the nexus between bank-specific risks and the financial stability of the banks for a panel data set of 15 scheduled banks in Pakistan over a 12-year period from 2009 to 2020. Using the fixed-effect model, the study result shows that bank-specific risks, i.e., credit risk and liquidity risk are detrimental to bank stability, whereas funding risk has no significant impact on bank stability. Besides these, bank size has also a negative impact on bank stability, whereas the return on assets (ROA) revealed a positive influence. To ensure stability, bank management should establish policies that confirm secure loan granting and timely reimbursement from customers to minimize the credit risk. Besides this, management should keenly observe the liquidity position and should also effectively mobilize the customer deposits to attain financial stability.

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The impact of liquidity and capital requirements on lending and stability of African banks

Cited by 8 publications

References 53 publications

The value relevance of bank cash Holdings: The moderating effect of board busyness

The value relevance of bank cash Holdings: The moderating effect of board busyness

Basel III liquidity regulatory framework and bank liquidity creation in MENA countries

Bank Specific Risks and Financial Stability Nexus: Evidence From Pakistan

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